EP 93: Filip Kaliszan (CEO, Verkada) AI Security Cameras to $3.5B Company

24:59And so we thought, hey, if we play nice with them, if we make our product compatible with that selling motion, that integrator will serve their customer. Hopefully, that's a successful, happy customer story. And that same integrator will give us access to more market deals, bring us deals. So that's a motion that very much played out over the last seven, eight years of being in business. but we definitely kind of thought about it from day one. But back to your kind of original question, which is like the validation, we got it on the phone and many of the partners were like, oh no, cloud, I don't want it.

25:35They're like stuck in their kind of way of doing things. But some and over time, more of them were excited about it. They're like, yeah, it's time to take this industry from on-premise to the cloud. And I think up to the point of us doing it, it hasn't really been done in a deep way, in a deep, kind of thoughtful way, right? So there'd all be, like many of our competitors would say, oh yeah, the camera has some cloud component to it. But if you unbox the product and use it, you'd very quickly realize, oh no, it's an on-premise product with some cloud attachment, as opposed to kind of an architecture that's thoughtfully built to be cloud first and be cloud native.

26:15And what are the benefits of that, that distinction you draw right there, building a first principle for the cloud? Yeah, I mean, I think, look, like I'll give you a very simple example here, right? So, you know, up to the point of Verkata, anyone buying video security would be buying cameras and then they would be buying servers that they're putting on a rack that are storing the video, right? And then that's just how it worked, right? It evolved from you buy cameras and it writes to tape and then you buy cameras and it writes to hard drives. and you literally go to the tape recorder or hard drive and that's where you watch the video.

26:49And then maybe over time, you VPN or use remote desktop or something like that to access that machine. But that was sort of the architecture of the time. One of the things that was very clear and we heard from every customer conversation and every partner conversation is that box, that server, it was a pain, right? It kept breaking and it would have hard drives and hard drive failures. And now you're servicing drives and replacing them in your RAID array. And by the way, this box is probably running Windows. And so you're dealing with Windows updates. You are now managing a server, which for so many other products in 2016, you no longer had to because they had moved to the cloud.

27:33And all of those troubles were abstracted away from the customer. And so that was a very obvious point for us to go after, which is to say, hey, our camera product, our software product that comes with it, it will not need that local server. It'll connect to the cloud. It'll be managed to the cloud. We will host the servers. We will host the software. We will deal with the updates and everything else that comes along with it. And that proved to be a big value to the customer. one, because it eliminated, you know, this big pain point on managing these devices on site. But two, it gives you so much more flexibility, right?

28:09You no longer have to think about, you know, how many terabytes or how many servers or how do you maintain it? You can just focus on your problem, which is how many cameras do I need to secure this building? And, you know, the cost and simplicity of deployment is like, literally, it just falls like it's like, you need 10 cameras, great, buy 10 cameras, like very easy to price it, very easy to get the deal done. You don't have to think about, do I have rack space and how many hard drives do I have to play? How long after launching with physical cameras before you had your next product? So the company starts in mid-2016, takes us about a year to launch our camera product.

28:47So we launched cameras towards the end of 2017. 2018 becomes our first year of sales. The product sort of takes off in that year. I think we had our first sort of real customer and revenue validation. That's when it happened. It was 2018. And so cameras are seemingly flying off the shelf. I mean, we're like scaling the company as fast as we can and trying to keep up with production. It's about 2019, maybe mid-2019, when we start thinking about access control. And is that from a customer pull standpoint or is that you pushing this on the customers and saying we should do both? So it was a bit of both, right?

29:28I mean, we talked about the background I had with, you know, with kind of door locks and that. So I had that, you know, thought, you know, on my mind. But what actually happened with our customers is they were loving our, you know, software solution that came with the camera so much that they wanted to integrate it with more of their building. So I would be on a customer call and they would say things like, hey, Philip, so, you know, you have these cameras, I have an alarm system. How do I plug the two together? When the alarm goes off, I want the associated video. Or, hey, I have a door access control system, and I want images or photos of everyone who comes in through my door for whatever security reason, right?

30:06So we keep hearing these stories. And the first answer, which was maybe the obvious and maybe naive one that we came up with was like, oh, fantastic. We're a cloud company. We'll build some APIs. We'll give you those APIs, and you can tie all the systems together. And that's actually exactly what we did in early 2019. So we build some APIs, give them to the customer. You know, I get back on the phone. Hey, customer, we've got these APIs. You can do all of your integrations. Customers, astounded, super happy. Like you built what you said you'd built so quickly. Fantastic. They buy more cameras.

30:38Time goes up. So far, so good. Three, four, five, six months later, we're like, wait a minute. You wanted me to build all these APIs. You're not actually consuming the APIs. What's wrong, right? And so I, you know, get back on the phones with the customers. And, you know, very quickly you learn and discover that some of these adjacent product categories suffer from the same challenges architecturally that cameras did, right? Meaning they're on premise, they're isolated. You know, customers had a variety of systems from different vendors on different locations. And so that's kind of where the light bulb went off.

31:14And we said, hey, maybe we shouldn't think of ourselves as just a video security company. Maybe we should think of what are the adjacencies that we can tackle, you know, kind of combine together and serve that customer dream of, you know, having this unified single pane of glass software platform that manages all aspects of this. And so how did you go about doing that? I had heard that maybe proverbially you lock some people in the basement and say, go figure this out. Literally. Yeah. So the story goes that, you know, we kicked off access control. And, you know, at the time, I think, you know, the whole company may have been 100 people or something like that, you know, maybe half of that in engineering.

31:54And so, you know, initially I grab a few folks and, hey, we're going to build, you know, this new product. We start working on it. And in my mind at the time, by the way, access control was going to be so much easier to build than a camera. I mean, you know, the complexity of the product to me seemed so much simpler than, you know, streaming petabytes of video through the Internet. And so, you know, we kick off the project and months pass and the progress just feels so slow. I mean, it took us a year to go from zero to having a shipping camera in a box. Six months into this access control journey, you know, we still have wires sticking out of, you know, doors and it barely works.

32:33And it's like, what's going on? What's wrong? And that's, you know, I think that's where we had a key moment and a key learning, which was, well, you know, The needs of a new team that has to build a product from scratch, go from zero to one, are dramatically different than what a team that's taking cameras and at that point scaling it from probably tens to hundreds of millions in sales. Those demands are completely different. On the camera side, it was all about slowing down a little bit and stability and following which customer feature requests were blocking enough deals. On the access side, it was, I want to move fast.

33:08I want to deploy and you probably should deploy seven times a day. And if it breaks, it doesn't matter because, you know, we're our only customer. Right. And so, yeah, we had that moment of like, crap, this will never work if this team is one team because these engineers end up fixing the camera bugs. And so at the time, and I'm glad my CTO stopped me from this, you know, I almost went, you know, full 180 from that. Right. So I said, we're going to take the team. We're going to create a whole new entity, like new legal entity. They will not touch the cameras, AWS. They will not touch the code.

33:41They will move to a new building. And, you know, they're going to build access control. And six months later, we'll see if it survives or not, right? So that was the mindset. And then, you know, we stopped a little short of that. So we didn't create a new entity. And we, you know, let the engineers still talk to each other. But we definitely did move them to a not quite basement, but, you know, kind of separate area of our office. And, yeah, we told them, don't touch any camera products. Don't touch any of their bugs. This is your sole mission. You're focused. The other thing was limiting the size of the team.

34:13I think there's something to be said about, you know, when you're building something new, the overhead of team communication and the number of people with ideas, you know, it's harder to manage 20 people than it is to six. And so I think it was five or six people that we initially said, your mission is access control and nothing else. Get something working in six months and let's deploy it in our office. And, you know, of course, six months later, we had a product that worked. And then I think it was June of 2020 when we launched that product into market. Hey, guys, this is Rashad. I work with Logan on the show, and I wanted to take a quick break to tell you about Redpoint's other podcast, Unsupervised Learning.

34:49Unsupervised Learning is our AI podcast where we interview guests from companies like Perplexity, OpenAI, Adobe, and many others about the topical things that are happening in the very, very rapidly developing landscape of AI. So if you're interested in going deeper, check out the link in this description for our YouTube channel, but also wherever you get your podcasts. So back to the show. Did your board members discourage you from launching a second product before the first? Was that some maturity or scale? Or what was that conversation like? I think it was almost like a skunk's work project on the side.

35:26There wasn't like a big board debate. I guess it was six people. It was five or six people. So, you know, it's like, hey, you know, they're experimenting with something. So I don't think there was a debate in that sense. What was interesting, and I remember this, you know, by the time I'm raising my Series B and C, which is, you know, both in 2019, the light bulb already went off for me, right? Like I knew that we're going from being a camera company to wanting to be this multi-product company and wanting to build access control. And so I start telling that story. my Series B and Series C pitch was all about, you know, Verkata started in video and now it's going to be this building platform.

36:03And I do think that at the time people, you know, looked at it and they nicely smiled and they said, well, you have good camera revenue, so here's a check and keep going at it. But, you know, I think in retrospect, you know, I'm so happy and so glad that we planted those seeds early because as the business grew, you start capturing more and more of that kind of core market you started. And again, when we were$0 in my living room, 20 billion seems like infinity. When you're doing hundreds of millions a year in cameras, you're like, wait a minute, I'm going to sort of start reaching market size limits here.

36:39So I need my products two, three, and four to pick up enough momentum to carry the company growth, hopefully for many years to come. There's a tension that exists between empowering and autonomy there and also shared experience or the commonality of a single product integrated that works together. How did you sort of think about, like, it sounds like this team went in the proverbial basement, maybe the literal basement to work on this, but what was kept as the same fabric of, hey, we're still going to use AWS, we're going to have the same database or whatever it is versus what did you empower people?

37:10Hey, if you want to use Postgres instead of Mongo. 100%. Yeah, it was the latter, right? So it was, yep, we have some services in AWS. If you like Google Cloud Platform, you know, go to town, like make your decisions. I think part of the realization we also had, and this certainly has continued to be true, you know, today as we build products 456 or 3456, technology just changes very, very quickly, right? And so the best decisions that we made to architect the cameras in 2016, 2017, those same decisions are not necessarily relevant for this new product you're building in 2020 or 2024. So we definitely empowered them to kind of explore and choose whatever they deemed best.

37:56I think the pieces that tied it together were very simple. It's the same platform. It's, you know, we have a design framework for how, you know, our software, which we call command should look, right? So, you know, we asked them, to the extent you can try to work within the design framework, if you need to break it, break it. But, you know, hopefully, like, stay sort of within the realm. Or, you know, very basic things like user login, right? Like, let's use the same user creation and authentication flow we already have. So the same user who's a camera user can now become an access user. So they were very sort of like almost like the lightest integration and touch points that you could imagine.

38:37And then, you know, generally how we've, you know, how we've done it over the years is once that product gets to market and it gets momentum and it gets iterations and, you know, kind of does what the customer wants, you know, then you start thinking about, oh, wait a minute, what are the commonalities, right? Like where can I build an integration so that the experience feels more seamless, right? And so, you know, we're today doing a lot of that. And it's not just those two products, but, you know, sort of across all six product lines, we think about this. So when does that get spun back in together into more of a single integrated team?

39:10Is it at a certain revenue threshold, certain customer size or? Never. It stays separate. So all the teams are separate. And I think we, you know, I think as a team and as a culture, we very much, you know, within engineering and more broadly, we believe in this idea of like divide and conquer. and, you know, kind of very clear autonomy and responsibility and accountability for different teams. And it certainly applies to product teams, right? So, you know, all of our product teams sit together. The engineers, the designers, the product managers, right? They work together on the product. Their roadmaps, they manage it themselves.

39:45They sometimes even use different tools. Like, you know, like our, you know, bigger team, like the camera team might use completely different workflows and tools from some of the newer, smaller teams because it's just, you know, kind of different things are appropriate at the different scale. What about the sales team? So is the sales team separate or does same people sell the same product? Yeah, so the sales team to date, you know, a seller will sell all of the products. And the idea there, and, you know, I think we tried to take it as far as we can, but the idea there was make it as easy as possible for the customer, right?

40:19So if you're a customer and you call Verkata, it's much easier for you if one human can tell you about, you know, the suite of products and how they integrate together than if you have to call, you know, Bob to talk about cameras and Sally to talk about alarms and so on. So that was the mindset there. You know, of course, you know, the challenge becomes, and this is, you know, a bridge we'll have to cross at some point that, you know, once you've got a portfolio of, you know, 15, 20, 30 products down the line, you know, that portfolio becomes hard for a single salesperson to grasp and understand.

40:51But that's actually also one of the areas where I think so far we've been successful by building a software solution that's so intuitive and so simple. So a lot of our focus is on when you build the software, I could literally add you to Verkata or send you a camera and you'd be up and running in minutes. And that's great for the customer because for obvious reasons, that's what they seek. but that's also great for our salespeople, right? If you join our company, I can teach you about our products very, very quickly and you can be coherent with that customer and you can tell that story. So that's helped, you know, this motion of having one seller talk about, you know, all six different components.

41:31And we essentially try to identify with the customer, like what's the entry point? Where do you feel the pain? Is it cameras or is it your alarm system? Or maybe you're trying to, you know, modernize your doors with wireless access control, right? Do you use SPFs to incentivize sales of new products? Or how do you keep salespeople from just selling more of the same over and over again? Because you are a market leader in physical security. And so I can imagine that might be the easiest thing to sell rather than the sixth product that just came out. Yeah. I mean, I think, you know, kind of hundreds of ideas and tactics is how I'd describe it.

42:04So, you know, I think first and foremost, I think of, you know, almost my product leader for each product area. I think of them almost as an owner or GM of that business. And so that person, a big part of their job is, I think of it as almost internal sales, right? Like the way they pitch it, the way they position it, every sales kickoff, like how they demo the products. So they're getting that kind of share of attention of the salespeople. They're on also many of the calls and they're helping our sales team invent how to talk about these new products, right? Because to your point, we've been selling cameras for eight years.

42:42we have a very good talk track. We know what questions to ask you. We know what questions you will ask. We're very comfortable with that. For every new product, you have to invent it from the beginning. And so the product team is kind of particularly helpful with that. But then, yeah, from SPIFs to focus on certain product areas, we've tried some overlay salespeople for particular kind of products. We try many tactics to get engagement and get people excited about selling the platform. From the customer side, one thing that's very interesting is a couple of years ago, I would have told you the customer thinks about it as individual products, right?

43:23Because that's how they bought historically. I think in 2020, when I launched Access Control, I would be on stage and I'd be talking to a customer audience and everyone looked at me and they're like, why are you launching this door product? Like fix some camera bugs. Like we have all these features we want. But we started telling that story of the integrated building, and that story stuck. Like three, four years later, now, 2024, we see it's more than 60 % of our large customers that have two or more Verkata product categories. And so you're almost feeling this pull from the customer. They want the integration.

44:00They want cameras that work with door locks, that work with the alarm system. and what we're seeing, which is extremely exciting to us, beyond that, they actually want to integrate our systems with other business systems. And that's fantastic to me, right? Because ultimately, we want to be that ecosystem. We want to be that platform. And so those are like the best early signs for me that that is beginning to happen. The types of people that are leading these different product lines internally, have you found particular characteristics that have lent themselves to people being successful as the entrepreneurs of these business units within your broader company?

44:39Yeah, I think it's, you know, frankly, one of the hardest roles to hire for. And I think it's, you know, in part, you try to find people with the right properties. And in part, I think you share the learning. And it's, you know, sort of the, I think the core group of us who started the company is often involved at the inception of these new ideas, just to sort of share knowledge. And it's not so much to define the new product as it is to, you know, share the foundation of how you go about building a new product. So, you know, the product leader or the engineering leader doesn't have to invent it from ground up.

45:15You know, a couple of kind of rules of thumb, like everyone on our product team, we hire with an engineering background and, you know, strong engineering background. So, I like builders. If I interview you and you tell me about something that you built and I ask you details about it and, you know, I don't know, maybe you built a microphone in your past life. Great. I want to know exactly how many ohms of resistance and the thickness of the membrane and where you got the components. And if you tell me all of that, I know you don't sleep and you go home and you think about microphones. You're passionate about it.

45:47So chances are if you start getting into it at Verkata, you'll soon know everything there is to know about an intercom and you're going to build the kind of best product possible. You can't bullshit that level of depth. You can't, right? I mean, you just, you know, and I think this is where, you know, to this day, actually, I interview every product leader at the company. I interview, you know, a lot of engineers at the company. And that's what I look for, right? It's like, it's the passion and excitement. Like, you can, you know, there's, I think of it as there's folks who get into it because, you know, quote unquote, it's a good career and it makes good money.

46:20That's not who I'm looking for, right? I'm looking for the person who's, you know, motivated and ambitious because they love the substance of what they're doing. And, you know, ideally they're ambitious and they make, you know, kind of a great career of it along the way. But that's almost secondary. Do you frame these roles as like almost tour of duty? Like, hey, come in, get this going. And then if you want to go be an entrepreneur, because I can imagine there's a tension of if you scoot too far entrepreneurial, they might want to leave. Yeah. And, you know, we've had that happen. And I think that's, you know, that's fantastic.

46:51I mean, I think, look, if the net result or the end result of this is, you know, many of our, I don't know, engineering leaders, product leaders, or top engineers, you know, do two, three, four, five years with us and then leave and start a company. I mean, that's fantastic. That's like beyond my wildest dreams. Like I would love to enable that. But yeah, it's definitely that zero to one mindset of wanting to take risks, move fast. And I think what's worked well is, you know, kind of back to your previous question about how we do it. It's that isolation and autonomy, you know, that gives, like, that's the environment that that type of person succeeds in, right?

47:31And they like it, right? Because if you are a zero to one person, if you have that entrepreneur spirit, the last thing you want is a roadmap review for the next six months with Philip. You know, it's like, no, like you get a room. It's a crappy room. you get some computers and some engineers, go build something. Yeah. We referenced him earlier, but Hans is the executive chairman. Yes, yes. Which is often a title. It could mean lots of things. Often a title that doesn't, I don't know what that means, but in practice, it sounds like he is extremely active, almost, we were talking earlier, but you'll stay up late and he'll get up early.

48:10And it's sort of like a 24-7 around-the-clock CEO dynamic going on. So can you talk a little bit about, for people that don't know, Hans was a co-founder of Meraki, right? Which was a very successful business acquired by Cisco. Can you give, I guess, a quick commercial on him? And then also, I mean, you two were almost set up, right, originally. It wasn't like you grew up next to each other or anything. And so how the relationship came to be? Yeah, yeah, sure. So look, yeah, Hans built Meraki and that was a fantastic business and they sold it to Cisco. I met him in 2016 leading up to the start of Ricotta.

48:47And I think when I took the meeting, it was an introduction through, again, a fellow friend. I think we were both thinking about building things. I think Hans was also thinking about investing in things. And so I took the meeting because I'm like, wow, this guy is really smart. Meraki is awesome. Why wouldn't I meet him? So that was, you know, that was kind of the beginning of the journey. I think what we very quickly realized is we share a very similar mindset. Like we think in a similar way. We're both kind of computer scientists, you know, into engineering, into devices, into details. And so that stood out to me very quickly.

49:24And, you know, at this point, I'm thinking of starting the next thing. The idea is not crystallized yet. But my mindset and my reaction after, you know, I think the first time we probably got coffee somewhere in Palo Alto was like, oh, this guy is great. I would love him to be, you know, at minimum in some circle, advisor, you know, helper, friend, something like that. So that's how it starts. You know, I think how it very quickly evolves is, you know, a couple of friends who are daughter co-founders and I were, you know, beginning to work every day at my house and Hans starts showing up. And, you know, first he shows up for a few hours and then for seven hours and then for 12 hours.

50:02And then we're working every day, day in and day out. And, you know, through that process, we land on the idea of video security. So that's really how the, you know, kind of relationship, you know, kind of formed at the beginning, if you will. And as you can imagine, it's kind of tricky, right? Because you're beginning to think about co-founding a company, which, you know, to me, it's like a, you know, it's going to be many decades of working together. and we had literally just met. I joke with some of my friends. It's like, hey, imagine you just went on a date and the next day you decide to get married.

50:34It's not too different. And by the way, you can unwind marriages. It's much harder to unwind investors. It's much harder to unwind companies and co-founders. So I think at the beginning, we're trying to very quickly figure out how do we work together, what works, what doesn't. And we wanted to keep it flexible, which is where that executive chairman title came from And I think, you know, that offered us that flexibility. You know, in practice, the way that this whole thing evolved is, you know, we're both super invested in the business. We're both spending a lot of time on it. We're co-leading the company together.

51:08And we, you know, we spend our time. We have a lot of overlap. But, you know, we have areas where, you know, we spend proportionately a little more time. I would say, you know, Hans is probably 60 % go-to-market and execution on that side, 40 % everything else. I'm probably like 60 % product and 40 % everything else. So there's kind of that kind of overlap. But any day in the office, you'd see both of us. Any day of the week, we're talking together. And I think what's awesome, and I'm not sure I would, I think in many cases, the co-leader thing doesn't work. For us, by coincidence, it worked fantastically.

51:47And what do you think that is? Is it that your brains are working similarly? I think so. I think so. I think, you know, one of the things that I always, candidates ask me about this question all the time, right? It's like, imagine you're an executive joining the team. Like, do you now have two bosses and how is they going to play out? And I think, you know, the answer I give, which then I think much of my team would validate is, look, because we have a similar view of the world and way of thinking, I think 95 times out of a hundred, even if Hans and I haven't talked about an issue, we will likely give you a directionally similar answer.

52:20And on those rare occasions that we don't, we're very quick and very aware to, you know, kind of communicate, hash it out, you know, and kind of decide like which way we want to go. But look, I think at the end of the day, it's been close to 10 years and it's been fantastic and it's worked really well. So today we think of it as a superpower. It's like you can divide and conquer. You have, you know, more, you know, sort of highly dedicated, motivated energy to solve different difficult problems. So I want to talk about a number of different things that I guess you guys do operating wise different than the average company.

52:55I guess we just touched on one having an executive chairman and a CEO kind of co-leading aspects of the company is definitely a little bit unusual. But first, I guess a philosophical question about this. So when do you decide to accept conventional wisdom versus try to reinvent or rethink things from a first principles standpoint when it comes to operating? I think we're very, I would say we're very first principle driven, but we consider the conventional wisdom, right? So I think you look at what the conventional wisdom is and what people do. And then from first principles, you think about, does this apply and should we follow that path?

53:34If yes, great. What can we learn? And I would say, you know, we learn and borrow ideas from a lot of successful companies all the time, which is fantastic. And I recommend everyone does that. But I think in many cases, you look at things and you're like, ah, the world might think everything is going this way and we come up with a unique idea. And in those cases, it's all about wanting to experiment, right? Like I think you come up with your own idea and it's not about, hey, my idea is better than the conventional wisdom and I have ego attached to it and so therefore we must do it that way. It's much more about let's try doing it this way and let's see what, you know, kind of how it plays out.

54:14If it's great, fantastic. We just invented something new. You know, if not, you can easily revert, you know, revert back to, you know, tried and true recipes. Is there something that stands out that you maybe thought about reinventing and then you're like, oh, hang on. There's a reason people have done this for extended periods of time. Oh, for sure. For sure. I mean, I'll tell you the one that we always joke about, right, which is when you're a small company, right, when you're a startup, when you're 10, 20, 50. maybe 100 people, there's a lot of, you know, you have this energy where like, oh, things are fantastic because there is no processes.

54:45And, you know, it's very, we just do things and we make good decisions and life goes on, right? And you make fun of the big companies. You're like, ah, like imagine how difficult it would be to get this thing done and the bureaucracy, right? And then as the, you know, company grows up and you're like 200 people and then 700 people are like, oh, wait a minute, like actually, you know, a little bit of a checkpoint on that PO sign of process, like that might be good so that, you know, you don't have random, I don't know, salesperson X spending, you know,$10 ,000 on a golf tournament or something like, you know, I'm making up examples, but you just learn.

55:20And then, you know, kind of going back to your, you know, your original question, which is like, well, how do you then blend this conventional wisdom with the first principles? I think in this very example. And we think about, okay, so why did we not want the process? And so then you focus on that and you're like, well, you don't want the process because it makes painful for ambitious people who just want to go forward to do their job. And so that's where you come up with these unconventional solutions that hopefully tackle that specific problem. And I'll give you a couple of examples of that.

55:58So one basic one is many companies have an IT department. And you'll have an email like helpdesk at company name.co or whatever. And you can email and you can get your laptop fixed to your screen or whatever it is. But it's this like big anonymous amorphous list. Who is the person who's actually going to help you, right? So, you know, once we got to the scale where we needed to build a IT function and a help desk functions because we couldn't set up all of our own devices, we said, well, let's do it. But let's make sure that there's a human attached to every piece of the organization, right? So if you're in sales, this is your person for IT.

56:38And if you're in engineering, this is your person for IT. And you never email IT at Verkata. You email John at Verkata, who happens to be the IT manager that might help you with your very issue. And what that then results in is a lot of accountability and a much smoother process, but a process that's lighter and smoother for all of your employees, right? So that's one of those ideas where I think, you know, fall on the category where on the surface you'd say, you know, we went very unconventional, right? We have decentralized recruiting, decentralized IT, decentralized human resources, but all of that results in our minds a fundamentally better and more personal employee experience, and it allows those employees to, you know, focus on their job, do what they're good at and move faster and not feel overwhelmed by, oh man, I'm going to email this whatever hub desk list and maybe three days later my laptop will work.

57:35It's ridiculous. So structurally, let's use sales as the example. So there's IT, there's HR. What was the third one that you said? Recruiting. Recruiting. I think recruiting is a really good one to do. So how does that work in practice where I assume there's dotted lines that they all sort of share with the marketing department or the finance department or the engineering department But how does it actually work in practice from a decisioning standpoint and accountability and all that? Yeah. So it's actually fairly broken apart and fairly decentralized. So there's not a central recruiting function at Verkata that traditionally might work for like a people team.

58:11Instead, the department's heads have their own head of recruiting. So the person who runs recruiting for sales is completely different and independent from the person who runs recruiting for engineering. and the rationale for that was sort of twofold. Initially, we thought, well, if it's split like that, it's really nice because Martin, who's my CTO, can't ever say that he didn't meet his hiring goals because of Ryan, who's running sales, and hey, he was using all the power of the recruiters, right? It's like, nope, you have a hiring goal, Martin, hire your recruiter, hire your recruiting function, however many of them you need to meet your hiring goal, right?

58:49Now you're fully responsible, fully accountable, but also you have the autonomy. You're a smart person. You can go do that. Same thing on sales. So that's kind of like the basis of how we arrived at that. The second piece that kind of comes out of it, which is kind of interesting and a side effect, and it works really well, is if you get into it, how you recruit an engineer is very different from how you recruit a salesperson. It's very different from how you recruit someone in finance, right? And so, you know, I think by breaking up the function, you've now allowed the functions to really specialize, right?

59:24And the activities and everything that goes along with it. So the functions then get much better, you know, kind of at executing their job. And the same is true, you know, again, take IT, right? The average demands on IT from an engineer are probably very different because maybe they need a desktop computer with many GPUs to train models from a salesperson who needs a laptop which has many hours of battery life and works really well with Zoom. And so you then specialize, and I think through that specialization, you end up delivering a much higher quality of experience to the employees at the company, which is then appreciated.

1:00:06And we're obsessed about measuring, and that's the other thing I would tell people is we, you know, for all of those functions, it was controversial when we launched it, but we created this idea of a neighborhood employee survey. So if you're in engineering, you know who your IT person is, your lawyer, your people person. And on a cadence, which is, I think, quarterly now, we rate those functions that help you or that are your support functions. And it's fantastic, right? Because we just immediately have clear visibility into like, okay, great. Like, I don't know, to make it up, right? Like our IT for sales is working super well.

1:00:44And maybe we have a gap in some other area. It also allows us to celebrate those functions a lot more in the company, right? How do you keep from different fiefdoms forming within that, that, hey, sales is always going to have a slightly different culture than engineering, but if they're operating this autonomously, how do you make sure there's still that shared cultural fabric that exists within a Verkata employee? Yeah, so I think a lot of it, and this kind of goes back to a little bit to COVID and working on site versus being remote and distributed. So we made a very big bet of wanting everyone on site.

1:01:18We're five days a week, everyone's on site. And we've been that way for quite some time, right? So we haven't really gone remote. I think that's really important because it creates these opportunities for hallway chats and communication and kind of the casual conversations that I think you just completely miss if you're remote or on Zoom. By the way, just because I think that's an important point. How big were you at the start of COVID employees-wise? I think we were maybe 250 or so employees, maybe 300 employees. And everyone was in office at the time five days a week. And you made it to say, I mean, with some, you know, as safely as you can do it and guardrails and all that, which I think is probably more conventional or more people are trying to go back in that direction.

1:02:00But can you talk about like that decision? And I'm sure not every employee was thrilled with that. And so just before we unpack the rationale, can you just talk about the decision itself? I mean, it was a stressful couple of months and actually years, but COVID happens March 2020. So like everyone else, we send everyone home, right? Because, well, that's what everyone's doing. That's what the government's mandating. And you buy all the tools and you do Zoom coffee chats and all this stuff. And some of it works. Some of it works better. Some of it works not so well. But very quickly, and when I say very quickly, I think sort of in the next two months, we you realize being remote causes a lot of friction points.

1:02:42And I'll give you like, you know, maybe two examples that are concrete, right? So, you know, my engineering team, you know, probably at the time was 100 people. And, you know, they're pretty close. When you're 100 people, you know everyone, you kind of get along. And so I saw this phenomenon where people who would otherwise, you know, be friends, would go out for movies or play tennis or go out to restaurants, started talking to each other exclusively via a text chat. I think, you know, Slack in our case. And they would get into these like deep arguments, right? And it's like engineers are now writing essays to each other, proving each other wrong.

1:03:18And people who've never thought it before are now like, you know, like this, right? And I have to like orchestrate calls to like calm them down and, you know, kind of like broker peace. That was shocking to me, right? And so I'm like, okay, well, that's clearly happening because like the, you know, the text medium of communication just like misses emotion, right? You don't see the facial expression. You don't see how the person is reacting. Your rate of information exchange is fundamentally slower. And so it starts causing these problems. And I could feel us turning from a group of people who want to solve problems together and we're just stoked to build something together because it's awesome and because it solves problems to, hey, your task is task number 275.

1:04:01Please do it by Monday. That sucks. That's not how you're creative. And so that problem existed on engineering. On the sales side, I think, frankly, sales is hard, right? You make a lot of calls to customers, you hear a lot of no's. And so I almost compared to a casino. If I gave you a slot machine to play at home, you'd play it for 10, 15 minutes and you'd get bored because you don't win. You need to be surrounded by other people who are winning. You need to be part of that success. And that's what drives you to work hard to make more calls to refine your story. And so those two things together, like, it made us realize, okay, if we want to grow as fast as we want to grow, and at the time we were doubling our employee base every 12 months, which we continue to do, we have to find ways to bring people back.

1:04:48And so we, you know, at the time it was a very controversial decision, but we, you know, we invested in on-site testing. We were fortunate we just moved into a large office, so we were able to space out desks. But through a variety of these things and working with the county, we were able to bring people back and make sure our workforce didn't disperse. So the other thing we did, which was crucial and paid off huge dividends in the long run, was I think at the time, a lot of people had this notion that the world might change forever and we're all going to be remote and dispersed. And we, you know, this is back to the first principles things, but we sat down and we thought about it.

1:05:27We're like, well, you know, for thousands and thousands of years, humans gathered together to do whatever they need to do. Right. And so we don't think we're all going to all of a sudden be remote and work in our, you know, small apartments or whatever and be on calls. And so, you know, then we implemented many programs and little tactics to make sure that we don't accidentally hire a, you know, remotely distributed group. And so one idea which, you know, credit to Hans for, you know, for coming up with this, which was awesome, was every offer letter, which like either Hans or I review all the offer letters, would have a, you know, from Google Maps API, a distance to the employee's home address with, you know, traffic hours, right?

1:06:11So how long would it take that person to come to office in a world where you're coming to office five days a week, right? So little things like that really helped to make sure we didn't end up in the situation, which I think many people are trying to revert back from now. And it paid huge dividends. And I assume you lost some people along the way that opted out of that. And now you're getting people that are opting into this culture. And so the trade-off's been worth it. Yeah, I think, you know, like to be very frank, like I, you know, in 2020, 2021, I would get on a lot of candidate calls and people would think I'm crazy or we're crazy for doing what we're doing.

1:06:50And they're like, you don't see the world. Like, yeah, but that's our opinion. That's what we think works for us. So we're very transparent. Like we never, I think it was very, very important for us to be upfront and set that expectation to the employees. And it almost became like a self-selection criteria, right? It's like, yep, if you want to be remote, fantastic. We're just probably not the place for you. And yeah, I think today it's a huge advantage. And so that's led to, back to the original question, less of these fiefdoms forming and more of the commonality of culture among the different groups.

1:07:23100%. And then, you know, I think, you know, I think you're back to that question of the different parts of the company. I think when you're in office, you can also employ a lot of, you know, kind of simple tactics to have people mix and talk to each other, right? So, you know, in our building in San Mateo, we moved into the building, we decided to knock a huge staircase through the three floors, which is literally in the center of the floor plate, so that employees can mix between the floors and then kind of use that as a central point of connection, right? Other things, the food we put in our micro kitchens is different on every floor, right?

1:08:02So, you know, if you like your snacks on the second floor, you're going to go there and you're going to run into, you know, whoever works there. So there's all these little tactics that I think work really well. We also, I think, at some point had to overcome the challenge of being a global company. So today we've got 16 offices around the world. And so then part of this becomes a, hey, only half of the employee base is in San Mateo. How do you get someone in Japan or South Korea or Poland or Europe or wherever to understand the company and the culture? And so we also built a program of many touch points.

1:08:41Every employee on boards in San Mateo for a couple of weeks, right? Cost us money, but very worth it, right? You get the culture, you get who people are. You're less afraid to talk to different people. It's not the scary HQ that you don't want to reach out to, right? Like we're always like very conscious of these things. And then we create a lot of opportunities to bring the team back together in person throughout the year. There's a balance that exists, and we touched on a little bit of this, but the difference between centralization and decentralization and accountability and all of that. How do you empower these different departments, different teams, different product owners, in the case of new products as they're coming out, empower them, but also maintain accountability and the sense of control that at the end of the day, you're delivering a product or a service or whatever it is that you want to stand behind?

1:09:31Yeah, I mean, I think, look, there is like simple frameworks and goals and how you think about it can, I think, go a very long way. And so, I mean, if you think about access control as the example, right, the door access product that we built, the second product, when we send that team to the basement and we separated them completely from the mothership, if you will, you know, Hans went and printed a giant banner. Like literally, I think it was eight foot long. And all it said, June 20, 2020 is the launch date of access control. Actually, June 20, 2020 or bust, right? And that literally hung above the team every day.

1:10:11And so everyone was aligned. You could not forget, you could not miss the fact that we are all marching to this totally arbitrary date of June 20, 2020, which is when we were going to launch that product, right? So that's fantastic because you don't have to be part of that team to understand that goal or that milestone, right? Anyone on every team understands that. And that's great because now, you know, the folks that are on the cameras team are not going to distract access because they appreciate that they have a tight deadline. You know, the folks in marketing are now aware, oh, crap, this thing is going to launch.

1:10:46I need my materials for SKO. I need my customer stories. You know, it's like it just gets everyone on the same page. You know, I think the other thing that we do, which helps here a lot is we try to think of, you know, fully staffing every function in every location, if that makes sense, right? So for many of our offices, they're like sales offices. They're fully staffed sales offices, right? So it's sales, sales engineering, you know, support localized to that region. That group of people works together and works with all those customers. They sort of share a mind state. and there's information that flows between them without necessarily requiring a big, heavy process over them.

1:11:31So that works and we certainly do that for products. So if you think about Intercom or whatever we're maybe building next, that group of people sits together, they have a clear responsibility, it's their only responsibility, they'll have a product marketing person, And that person by name is assigned to them, only to them. They know each other. They work. And ideally, they have some dates and key deliverables. So that's kind of what's worked well for us. As you think about people that have risen quickly within Burkata or have been very successful, the early people in the journey that are maybe the executives there, are there commonalities in terms of their characteristics or traits?

1:12:13We touched on the entrepreneurialism and the depth that some of your leaders within different product areas can go into. But what about just other functional areas or roles? Yeah, I mean, I think the reality of kind of a company like ours, and I think there's many examples of this, right? We grew very quickly, right? So for a couple of years, you're growing at 2x or more a year. And so everything is changing. And so I think that the type of person that succeeds in that environment is the person who can hold on to that change and can embrace the change. and you had this way of doing something and now you have a new way, can you adapt to it, right?

1:12:51So that's generally speaking, I would say, who succeeds and who excels and that takes a lot of work. It's hard, it's not for everyone, but that's, I think, what makes some of those early folks successful. The other thing I would tell you is, as the company has scaled, over time you realize that the growth of the company often far exceeds the growth of the individuals, myself included, that are in the company, right? Like you just can't keep up with the compounding factor. And so, you know, I think there's a time and place where you say, hey, for this function, we really need someone, you know, external with a lot of experience who knows about this area.

1:13:32And, you know, I think for me and in my role and with the leadership team, you know, that's particularly critical, right? If everyone on my team I have to think about and second guess their decisions, that's an awful work relation, right? Like you don't like working for me because Philip is poking his finger into everything. But if you hire people who are ideally a few steps ahead and have seen that scale, man, like delegating to them becomes so much easier. They're so much more competent at executing what they need to do. They bring in new ideas. And so we've done a fair share of, you know, just along the journey, looking for people with that broader experience and bringing them on board.

1:14:11And that's paid massive dividends. I think that's one of the hardest things for any company to do is when the people that took you there aren't going to be the ones that are going to take you there. And it's nothing against just the slope of the line of the company is often going to outpace the slope of the line of the individual. Is there a question that you'll ask yourself at that moment in time once you're trying to assess, hey, is this person really going to be the person for the next year or a way that you go about thinking about making that decision? Oh, 100%. I mean, I think, look, I think this is one of the, you know, the conversations I think where a board can be extremely valuable.

1:14:42And I think that, you know, that conversation for us happens after every board meeting, we have a very quick debrief and we talk about, you know, everyone on the leadership team, myself included, right? and we talk about how it's going and who's behind and who's ahead and who's got a lot of runway in front of them and who maybe needs to bring either an advisor or a person who will ultimately run the function. And so we've done the whole gamut of these things. I think on the other side of that, what's really important and I think I try to be very clear with my team on this front and I do it mainly through one-on-ones and spending a lot of time with my team is just limiting the ego, right?

1:15:25I think if everyone is, you know, steering in the same direction and wanting to build the company to be big and everyone believes how big the company is and acknowledges that, hey, we haven't done it at this scale yet. When that conversation happens, it becomes so much easier, right? And then you can make that change, right? You can, you know, bring the senior person and, you know, hopefully the person who was there before in the seat stays and has a, you know, valuable and lasting role in the company. Is there something you look back on either, you know, your first business prior to selling to Chegg or even the early days of Arcata that you wish from an operating standpoint, you could go back and tell yourself like, hey, this thing in particular you should focus on or think about more?

1:16:09100%. I think at smaller places before, and certainly this is the first time that I directly oversee a team that's 2 ,000 people, I think one of those inflection points for me was roughly around when the company is maybe 200, 300 people. and then I would for sure tell this to my younger self, but when you cross that threshold, that's about when you can't possibly interview every employee. You have to delegate that responsibility. You may be onboard every employee, which to this day, actually, I do all the onboardings for the employees, but you don't have a tight, close connection with everyone who works for you, right?

1:16:50The first 100 or 200 people, you pretty much know them and they know you. And I think that's the piece that I definitely screwed up around the time, which was, you know, we would hire all these people. They'd start, they'd start working. They'd understand what the company does. But I didn't take a very active effort in how I think about my presence internally, what I say and what I repeat at, you know, all hands meetings or Q &As with teams or, you know, how often, how many times a week do I go, you know, to dinner with a group of folks that I might otherwise not hang out with, right? So all of those touch points didn't exist.

1:17:23And I think that, you know, that created this environment where everyone's like, oh, yeah, Philip is just, you know, he's just some asshole who's running the company, right? And then, you know, it's much easier to get grumpy when, you know, the guy running it or the person running it is random than if you have, you know, some kind of personal connection and understanding. And I think for me in particular, like I'm a fairly private person, right? Like I, you know, I don't, I don't know, post on Twitter and share my life story. unfaithing, like I keep, you know, kind of my, my information close to myself.

1:17:57So it's even the simple things like, you know, telling the company what's going on in my life. Like, Hey, I like skiing. I, you know, I have kids and you know, like everyone else, like, you know, they keep me up at night. You need to do these things that humanize you. And I think particularly at that point of inflection of going from like the low hundreds of employees to the like, you know, close to a thousand employees, that is extremely critical. And if I could go back in time and, you know, re-inject more of that, I think I would have built more broader trust early on with much of our employee base.

1:18:31We touched on, I mean, one of the things that often comes up in startups in the early days is there's a bias to the doers and the, you know, people that sell product or build product typically. And we talked about how sometimes having some more of those management and functionality or just people overseeing in different regards is really beneficial. Were there any hires that you wished you had made earlier in the journey, specific titles of people? Like, I really should have brought this in 100 people earlier. Yeah. I mean, you'll appreciate the story, I think, from, I think it was our Series B.

1:19:04But, you know, around then, I think my board was telling me, Philip, you really need a CFO. And I had someone running accounting and, you know, he's great. He's actually at the company to this day. and I'm like, I don't need a CFO. I have, you know, Tim who runs accounting is amazing. And everything is tip top. And then I remember being in a, you know, series B discussion. And up to that point, you know, fundraising was so much of product and storytelling and customers. Like I did not have to get into any financial details in a, you know, in kind of an investor discussion at the seed or the A, because that's just not where the conversation goes.

1:19:39And so now I'm doing the, I think it was the B or the C. I don't have my CFO yet. and Tim is there in the room and he knows everything, all the details of the company. And I forget what the question was. It was something about revenue growth or gap recognition, whatever it was. And Tim opens a very complex Excel model and he's like, well, if you look at this tab, the fifth tab, it's cell BZ27 on a blah, blah, blah basis. And he's just like, Tim, don't talk. Like we will never get the deal done. And we both laughed about it after like, you know, with Tim. But then, you know, we brought in Cameron, who's our, you know, CFO, and he's fantastic at that, you know, sort of that aspect of it, right?

1:20:19Which is like, okay, you have different functions within finance. You've got, you know, accounting and all of that stuff, which, you know, we handle really well. But then we had to build strategic finance and planning and, you know, kind of the storytelling aspect of it. And how do you communicate, you know, kind of numbers to, you know, to external parties? So that was definitely one where I felt like I could have done it, I don't know, six, eight months later. I think at a greater scale, so closer to today, my most recent ad to the exec team was a general counsel. And that one was interesting because I'll tell you how I thought about it before hiring our general counsel and how I think about it now.

1:21:01Before hiring our general counsel, my thought on it was very simplistic. It was when the bills from our primary external counsel exceed the salary of what a general counsel would be. I'm going to hire a general counsel. Yeah. And like, you know, he's going to make it or he or she is going to make it more efficient. And, you know, that's kind of how I thought about it. It's very, very simplistic. I think, you know, until, you know, sort of you go through a couple more complex situations or harder situations, I think what I didn't appreciate is how much it is the case that when you're an external counsel, your entire, you know, thesis of existence is to be like maximally risk averse, right?

1:21:44Like you're evaluating everything from the perspective of like, I want to give you advice and that advice better be right. And if it's wrong, you're going to be pissed off at me. And, you know, that's not good for me. And I think, you know, you bring someone in-house and they start, you know, thinking more from the perspective of the business. It's like, well, great. Here's the different, you know, kind of paths that these things can go. And, you know, here's your probability tree. And, you know, no lawyer likes to ascribe odds to anything. But, you know, once you have one in-house, they will.

1:22:13And so you can start building like probability trees and outcomes. And you're like, well, you know, in this case, maybe it is worth litigating because the likely outcome in that path is actually, you know, financially or from whatever angle, you know, just much better. And so you, I think, yeah, it's one of those functions where for the longest time, I just thought about it like as a, you know, it's a support function. Keep it external, keep it simple. When it exceeds a cost, I'll bring someone in. And then once we brought Bill Berry in, who came from Tesla, fantastic, right? He's part of the team.

1:22:46He's thinking about all these problems and kind of in a very strategic way can help us make those decisions. That's interesting. The incentive alignment is much more direct when they're on inside because they only get fired if they're the outside and they give you the wrong advice. Exactly. They give you the wrong advice and you switch firms and it's easy to switch firms. But when they're in-house, they have skin in the game. A little bit more probabilistic. Hey, here's what's most likely to happen. So there's some interesting perks you all do, I guess, to help build culture. 333 program. Can you talk a little bit about that and how that came to be?

1:23:19Yeah. So 333, full credit to our CFO, Cameron. So free people going out for drinks after 3 p.m. or drinks for food. It's free, right? So that was the idea behind the program. And, you know, I think generally when we built our offices, all 16 of our offices around the world, we tried to locate them in sort of downtown areas or the cool parts of town, if you will. And we're very, very careful about that, you know, making sure that we hit the right audience. But then, yeah, we wanted to make it easy for employees to hang out, right? Like the idea is, you know, it's the afternoon and, you know, three people go out and hang out together.

1:23:59chances are you'll talk about something that's relevant or work-related or you'll share ideas and ultimately that's going to benefit us and you know that's been hugely successful what i find funny about that program or what what you know i think is is kind of awesome and important in creating these things is you know i think predating 333 at vercata if you took two fellow employees and went out for dinner or drinks or whatever and expensed it like no problem like we would have gotten approved, it wouldn't have been an issue. But I think putting a name and a program and advertising it and then literally like posters in the elevator and little things around the office, it actually, that's what mattered.

1:24:41It wasn't about the money. It wasn't about the budgeting. It was about everyone knowing that this is something they can do and then everyone getting excited about it. So again, it's one of those, in my mind, hundreds of tactics of like, how do you get the team to be cohesive and how do you get the team to get along? I've heard that you're obsessed with getting hiring, right? Specifically on engineering, but in the people team as well. But you've actually gone so far as maybe still interviewing summer interns or something along the way. Can you talk about like, obviously, I don't think anyone would dispute people are important to building a business.

1:25:16But what level you will drill in on and why that's so important to you? Yes, I think, look, first I'll say hiring is like a super, super important part of the job. And I think one of the benefits of Hans and I co-leading is like, you know, a cheat code or superpower. We have like key interviews people and I interview people. So together, we can interview a lot of people, which is, you know, which is just awesome. you know I think I think of it in different ways right so there's different roles that I think is kind of very critical so certainly any director VP high level roles you know I'll be in the interview and then you know there's functions where I interview people either because I want to teach the rest of the team what makes a great candidate or how the team arrive at that conclusion or because it's a new team right I think if you're talking about a new team, I will interview everyone on that team.

1:26:11And the rationale we have behind that is, you know, it's the stem cell, right? It's how that team is going to grow. If those first few people are excellent, the chance that they can attract more excellent people is very high. Conversely, if you hire, if you create a new function and the first few people in it are very average, like a year or two later, you're going to have a big problem, right? Because now you're going to have a team that's, I don't know, 20, 30, maybe 40 people if you're growing fast. And if they're all average, now making a change is very, very expensive, very difficult, very emotionally expensive, very taxing on the team.

1:26:46So I think any new teams, for sure I interview. For engineering, it's interesting. I don't interview every engineer. I certainly don't interview every summer intern. The volume far exceeds my number of hours in my week. What I do do is I read the offer packets for everyone on that team, as well as, you know, I meet most people on the product team. And what I'm essentially looking for, you know, as I do that is I look for two things. And people, you know, kind of laugh at it because for interns, I will read their transcript. Like, you know, I can tell you a lot about, you know, different CS curricula at different schools.

1:27:29But I do it not so much because like, hey, I'm just trying to find the person with the highest GPA. I'm trying to suss out like, are they really the person who's passionate about building? Are they really an engineer? Or is it, hey, I got into an engineering because, you know, I know someone who made a lot of money being an engineer, right? So, you know, you get hints in the transcript. It's like which classes and which sequence? How did they take them? What project did they work on, right? And then I look for hints in the interview notes, right? And I think for the most part, it's a cursory check, right?

1:28:02Like these things come into my inbox. It's a two, three minute, I think on average, two minutes read for me. I have a sort of a filter in my inbox that makes it very efficient for me. I go through many of them very fast and it's okay, okay, okay, okay, okay. But every once in a while, and it's probably like two out of every 10 or maybe something like that, I'll read it. And I just sent some notes back to the team. Like, are you sure, right? And here's the three things that stand out to me, you know, whatever they may be. And that's very helpful because, you know, not everyone gets to see all the candidates, right?

1:28:38And so like by being the person who reads all of these resumes and making that efficient for myself, I sort of have a very intuitive and natural understanding of the bar. And so maybe if a new engineering manager is trying to hire an intern and they're evaluating it relative to however they met, they might not know that most other interns that Verkata hire are way better. And so it's like, hey, by the way, take a look at these four resumes. And I might even forward some of the other resumes to kind of have a discussion. And it just helps the team arrive at good decisions. What is something that you mentioned, like the course load and you've learned a lot about different CS programs and like the sequencing of it.

1:29:21Like what's an example of something that you've been able to tease out that someone really loves engineering for the sake of doing it versus someone going through the motions? Yeah, I mean, I think that, you know, the things that really stand out, and this is when you have a conversation with a person, is for sure, you know, when they tell you about a project they did and they just go deep on details, right? It's like, I built this thing and this thing broke and this thing sucked. Let me show you, like, let me pull up the website. Like, I love that. Like, that rarely goes wrong. And then those people get hired.

1:29:51Many people put there on their resume or on their transcripts that you can, you know, figure out like, okay, they worked on such and such project and you can look it up quickly. And, you know, sometimes you get an idea from that. You know, I think the other thing is when you look at a transcript and you look at the role, you're looking at the mix of skills and classes that they did really well in. And so, you know, for example, if you're applying to be an intern and you're going to be doing firmware and working in C, like I would for sure want to see that you took, you know, systems and maybe compilers and algorithms, right?

1:30:24And then so I look at, you know, I look at, you know, kind of those kinds of things. and then over time you start recognizing patterns. So like, you know, for schools that you see a lot of candidates from, you'll know that there is, you know, three levels of a computer systems system or computer engineering systems class. And you're like, okay, well, the person who's applying to be a firmware engineer, did they get an A in the like, you know, 101 version of the class or the 201 or the 301 version of the class? And you're like, ah, like, you know, that gives you a pretty solid idea pretty quickly.

1:30:55I think this was from Hans that I had heard him say this, but that he and you at Verkata would rather hire the top knife salesman or the person that's the best at selling knives than like a good software salesman. And you'd rather teach someone that doesn't know how to sell software or doesn't know how to sell physical security or whatever, how to sell it, than take someone from the industry and port them over. Is that something that you believe? And why do you think that's the case? Well, I think, look, I think the reality of it is that, you know, there's just such a vast variety of talent pools and you want to be able to tap into those talent pools.

1:31:36I think the other part of this is our product is fairly teachable, right? We talked about how, you know, it's all software and how, you know, I think if I gave you Verkata, you would be up and running in, you know, minutes. So I think we realized that. And so if you realize that you're like, well, which people are going to make the best salespeople? And I think it comes down to like, you know, sort of the, you know, the very basics of ambition and drive and how good are you of a customer? Like, you know, those types of aspects rather than, you know, have you necessarily sold software or, you know, I think maybe even more naive way of thinking about it would be, have you sold cameras before or access control?

1:32:19I was like, man, that's completely irrelevant. It's a shallow pond to be fishing in. It's a shallow pond to be fishing in. I think a lot of our competitors actually sell exclusively through resellers. They don't have necessarily sales teams. But yeah, we found that tapping into these diverse pools of talent has been phenomenal. And we've got salespeople that come from worlds like photocopiers to software worlds like DocuSign, for example, to medical sales reps, right? And why do you like something like medical sales, right? For years and years, that was a very lucrative sales profession. And so you can find lots of people who grew up in that environment, worked really hard, did really well.

1:33:04They want that to continue. And it just so happens that that market is becoming less lucrative. So they're looking for a change. Fantastic. Let's take them in. Let's take their, you know, sales skills and apply them to our, you know, kind of software sale, enable them to do it. And, you know, and off they go. Right. So it's worked very well. I want to back up March 2021. There was Verkata was in the news for a hack. Can you, for people that are unfamiliar with the story, which I don't know if you guys have spoken publicly about it or not. But can you explain what happened, how you responded to it, go into that?

1:33:46Sure, yeah. So March of 2021, we had a security breach that happened on our system. Very stressful day. By the way, to just give you the reality of it, I come into the office, and it was a Tuesday morning. I'm getting my coffee downstairs, and I get a call, and it's like, hey, Philip, we have a situation. And so I run upstairs and, you know, I think we, you know, we essentially find out that a support systems machine that we've used to, you know, kind of navigate customer issues via our support team, you know, had inadvertently been exposed to the internet and then compromised. And, you know, an attacker got access to some of our system, right?

1:34:26So it's one of those moments where, like, you know, everything freezes and the sky is falling and you're like, holy smokes, like, what's next? What's going to happen? But, you know, I think in that moment, what's really critical is kind of, okay, staying level-headed and look at the facts, look at what you know, start getting more facts, start dividing the tasks. And that's kind of like exactly what we started doing. Was it a news story at that point or were you out in front of it right now? Yeah, so it wasn't a news story yet, but we knew of a news outlet that was going to go live with that story within a few hours.

1:35:03you know so that's what we were working with right like it's like we have a few hours of time to maybe respond to the story maybe not respond to the story you know i think what was uh you know it was really helpful in that in that moment of of like that maximum stress was um you know i mentioned to you like you always try to look for other people who've dealt with a situation and learn from them and so i um i happened to uh you know i happened to know from i had met him through you know through a sequoia event um we shared an uber once way back i paid for the uber and said he owes me one um so i call and i'm like hey dude so you remember that you were you remember the uber ride or you said you did and of course is a super awesome person yeah uh and so you know you're you know i have the lawyers and the board members and the investors everyone's calling and it's like the sky is falling and i call it he's like it's gonna be fine just take a breath it's going to be fine.

1:36:01So that's the first thing he says. And I'm like, right, like you hear that and you're like, okay, great. So like, you know, level your head and start thinking of what to do. And he said, you know, I think it was the best piece of advice that anyone had given me in that crisis. And the advice was, no matter what you do, talk to your customers, the affected customers, and all customers as much as often as you humanly can. And I think we were, you know, very, very fortunate as a company in that, you know, from the very beginning of the company, you know, we always, you know, we cared about security, we wanted the products to be secure, we cared about activity logging.

1:36:40And so we built enough systems in place that allowed us to have a very thoughtful, quick and measured response to the, you know, to the affected customers. And so, you know, sort of within hours, and certainly within days, you know, the crisis went from this, like, the sky is falling and the media has like a very big story about how, you know, 100 ,000 cameras were compromised or something like that to, well, actually, you know, the number of customers affected by this was like 2 % of our customer population. And then it became a journey of, you know, talking to those customers, explaining to them how this happened to the degree that we knew, right?

1:37:18And then realize at the time you don't know all the facts, so you have to be very careful what you say, and then mitigating it, right? Putting in place a plan, right? So I remember, you know, for weeks, and this was also advice for weeks after this, you know, this incident, I would do a weekly customer security webinar. And, you know, literally the way it went would be, you know, I would think very carefully about what the lawyers told me I could and couldn't say. I would try to find like, you know, the perfect line through that. I would start the webinar by sharing all these findings or these new things that we'd know.

1:37:53But then I would open it on the line to all the customers and say, hey, what else do you want to know? Let us tell you. And I think what was very valuable is we, through that process, we learned what customers really cared about. And we were able to provide a response to them, which I think ultimately, I think we scored very well on the response to our customers. Most of them stayed with us. Most of them transacted with us. A big portion of those 100 customers actually transacted with us within the same quarter because they were so pleased with how well that response went. But yeah, definitely a very tough learning experience is what we learned going through it.

1:38:37When you're communicating with the customers and explaining, obviously you have imperfect information about what's happened, but you're trying to be transparent about it. You're trying to regain their trust, but not misstate anything. You also don't want your lawyers to get pissed off at you for doing XYZ thing. Like, I imagine that's a tough line for you to walk in all of that. If someone else, and maybe it's not a security thing, but a PR crisis that someone else is going through, other than, you know, take a deep breath and the advice he gave you. Do you wish you had been more public in your communication?

1:39:13Do you wish that you had erred even more on the side of transparency with the customers? Do you think you threaded the needle appropriately? Any advice or takeaway? Yeah, I mean, I think we looked like we went as transparent as we humanly could. And that was advice. And that's the advice that I would give anyone. You know, I think it for us was for me, it was super helpful to talk to like, I think if anyone's going through anything like that, find someone who's gone through something like that. And that helps more than anything because you it allows you to have a level head. And it allows you to think about it not as a, you know, the sky is falling, the world is ending, but more as a, hey, there's a problem.

1:39:48These are the components of the problem and I need to solve this problem. And one of the key objectives of solving the problem is to maintain trust with your customers who are ultimately your most important audience, right? If you maintain trust with your customers, if they believe what you're saying, you know, that message like really resonated. it. And it was like extremely clarifying in all of the decision-making. It's just, you go through it and then that's, okay, if something is ambiguous, just revert back to that. Like, what would the customer want to hear? And then, you know, I think you have to get into the nuance of like, okay, how do you deliver the message?

1:40:24And, you know, what's appropriate for a webinar? And like, what do you call an individual customer and say specific to them, right? There's that nuance. But yeah, that's definitely how I would approach it. And I think in any context for us, in general, I would say transparency with the audience really helps. I think the challenge of it is, I think, and I remember specific details of the breach at the time, which I really wanted to talk about and I really knew I couldn't talk about. And so you have to then, because essentially what you're working with is uncertain information, right? So you're waiting for all the details to be as certain as possible before you share them.

1:41:07And so the hardest thing for me was like, okay, I know I have these folks on the line and I know they want to hear this one thing, which I already know, and I know it's going to make them all feel better, but my confidence level on is, you know, whatever, 75%, not 90 yet, so I have to wait a week. And that was a very hard, you know, feeling to overcome, I guess. But that's that balance, right? where you have to just, okay, take a pause. I've shared enough. I think I'm trustworthy. I think you get what I'm saying. And I promise you I'll give you these next bits of information as soon as these pieces come in.

1:41:41And that's kind of how you navigate it. So backing up to the early, early days. So you grew up in Poland originally? Correct, yeah. And then moved to Paris, which is called Paris. And can you take me through there to Stanford? My understanding is the first time you stepped foot on American soil was... Was you going to Stanford? Is that right? Not quite. I got into Duke and I went for the admin weekend. That was literally the first time I stepped foot in American soil, but that was like a two-day trip. And then I came to Stanford ultimately, and that's the first time I stepped foot in California.

1:42:16So that's the journey. But back to your story, I grew up in Poland. So born there in the north of Poland, small town. you know kind of fantastic time for for Poland at the time by the way I you know I remember the country just changing so rapidly right so so post-communist and and kind of all the investment and all the change you know all the change happening and then from there I go to Paris so my mom's job moved us you know kind of to you know to France initially that was just for one year and ultimately we stayed there five years so I you know I kind of graduated high school there At the time we moved, I spoke some English.

1:42:56I didn't speak any French. So that's what landed me at the American high school in Paris. And from there, you know, I applied to schools in the U.S. And that was a journey in itself, right? I heard when you were in Poland, top of the class and, you know, teaching everyone, like, you know, building websites for people and doing all that. And then there was a transition to Paris, maybe around the language or whatever. Can you talk about that adjustment? Yeah, I mean, I think, look, it was a good training ground is how I think about it, right? So, again, like in Palme, you know, I think the town I grew up in population was maybe 100 or 120 ,000.

1:43:32So, small town. I go to a public school and, you know, I was, whatever, one of the smarter kids in class, I guess, and had lots of friends, good, you know, kind of good energy. you know we moved to Paris I think what was the reality for me was I had to now jump in an environment where okay everyone is speaking English you know I think the reality was I was one of the few kids who moved truly from another country and went to a non-English native speaking school so the majority of the kids in my you know middle school and then high school in Paris were you know kids who had been traveling with expat parents or maybe diplomat parents like their whole life right so this was the third or fifth international schools for them they know the system they know how it works um so yeah it was definitely you know kind of a bit of a adjustment for me and and and this period of like well you know here i am top of the class like life is easy and you know i'm cruising through it to like oh man like i really have a lot of work to do to catch up on, you know, my skills in English, both for the academics, but, you know, I think, and I felt the second more just for the social interaction, right?

1:44:44Like I moved when I was 13. You know, my command of the English language definitely didn't extend into the slang territory, right? So how you communicate with other kids at that age was definitely challenging for me, you know, for the first, I don't know, a couple of months, maybe first year. And did that experience you think make, I mean, did you carry elements with that with you today, like in terms of adaptability or was it just a one-off experience? I think so. I mean, I think it was a very formative experience in that, and I owe this, you know, 100 % to my parents, right? But I think for years prior to that, they, you know, they helped me build my confidence and they helped me be confident in the things that I'm good at, right?

1:45:28And so I was good at school and certain subjects and math and whatever, computers, whatever aspects. And so I think when you're thrown into that situation where everything is new and everything is changing and you can't say in the right words what you want to say to the kid that you want to become friends with, having that solid foundation or that solid anchor in your head that, well, this may not have gone the way I want it, But, you know, I'm still good at this, this, this and that. And so I'm going to like anchor on that and build on that foundation. You know, I think that is, you know, that is, that is very helpful.

1:46:07What I only learned, you know, I think about myself, like in the Verkata journey through, you know, through a coach, but I think is, you know, somewhat related to this is I tend to have an extremely level head through these different situations, right? So, you know, whether it's, you know, I moved to a new school in Paris and you have to make friends and you don't have enough English language or it's, you know, the crisis we just talked about, you know, I, for one reason or another, I have this, you know, kind of ability to just stay calm, right? It's like, okay, the sky is falling, everyone's sort of panicking to stay calm.

1:46:40Like, listen, combine the facts, dissect the problems, figure out who's good at solving which problems, you know, sort of assign, agree, delegate, solve the problem and move on, right? I think one thing that helps me do that is, which sometimes does result in me being quite stressed, but usually works, is I often try to think of in these difficult situations, what's the worst possible outcome? and, you know, once I establish that the worst possible outcome is not so bad or maybe I'm delusional and I convince myself that the worst possible outcome is not so bad, you know, then you're like, okay, great.

1:47:19Now I'm just, you know, trying to optimize above that. And I think that's how I, you know, that's how I deal with a lot of, you know, a lot of the challenges that land on my table. So when you got to Stanford, CourseRank did what exactly and how long was the journey before selling to Chegg? Yeah, so I landed at Stanford and, you know, one of my co-founders now and roommate back then or dorm mate back in freshman year is into computer science. And I'm like into computers, but never programmed. So he basically convinces me to do computer science. And I'm like super grateful for that. So we start skiing together and doing CS classes.

1:47:58And then both skills like last to today. That's Benjamin. and you know along the journey I think a year or two into it what was awesome about computer science at the time for me was you know with seemingly just like four or five classes that I had taken you could create something useful out of like nothing out of just sheer energy right and so I think by sophomore year Benjamin and I had started working on variety of projects and ideas and we always I don't know I always liked building something that would be useful to someone like That just drives me. And so I tried doing that a couple of times, a couple of different projects with him.

1:48:39And ultimately, we got along well enough where we said, hey, we like working together. So we should take a class where you get to build a project. And so Stanford has a class back then, it was called CS194, where you build a, the whole premise of the class is you build a team, and then you build a project together that's some real world application. So we get into that class, and that was the beginning of CourseRank, which was then my first startup. And the idea was really simple. I mean, it was a need-based tool for students. So in 2006, 7, 8, 9, when I was in school at Stanford, you'd get this book, 800 pages long, and you'd pick classes out of that book.

1:49:20And that seemed crazy, right? You had Google and Amazon and Netflix and all these things happening. and here we are at Stanford every quarter, you know, reading this mega book that gets delivered in front of our doorstep to figure out our class schedule. Oh, wait a minute, half of the classes that you actually liked that you found in the book, you can't sign up for because the schedule is full or maybe the, you know, schedule doesn't work with some other class that you, you know, wanted to take, right? So we realized this like class planning and picking classes is really hard and we thought we should solve that problem.

1:49:52And so that was the beginning of CourseRank. And we built a tool that essentially took all that data from the school, allowed students to write comments and rate classes so you could share information and share knowledge. But then you could also build schedules and academic plans. And it was really fantastic because we built a prototype in three months in the course of the quarter of the class. and very shortly after, like hundreds of our friends were using it and getting value out of it and telling us how awesome that was. And to me, that's that moment that's like, that drives me. And to this day, like the most exciting thing is, you know, I'll build some feature, I'll work with some engineers on some features and you get on stage and you announce it or you show it to a customer, like getting that reaction, that wow moment or that aha moment.

1:50:40I mean, it gets me out of bed every day. It's just super awesome. Now, after you sold CourseRank to Chag, we talked about you stayed on for a little while, and then you come up with the idea for Vercata. My understanding, while now I think Vercata is one of the best private companies growing fast, of a big scale, good differentiation moats and all that. My understanding is in the early days, it wasn't the most popular idea with venture capitalists. Can you talk about the initial like pitching of the idea and maybe what you learned that would be of interest to a potential entrepreneur? For sure.

1:51:20I mean, and I tell this, I actually tell this story at onboarding to employees all the time. But, you know, it was a very sobering beginning is how I describe it, right? So we, you know, four of us get together. We solidify on this idea. We start the company. And by the way, four of you have had repeat success selling a company. and one of your co-founders was a co-founder of Meraki, which is insanely successful. And you guys were having hard times in the early days. Yeah, so the four of us, we get together, we start building it. And because of everything you just said, we're like, man, we're so bullish.

1:51:55We're like, oh, we found this market. No one's done anything. There's no competitors. We know how to tell the story. We've done it before. We're well equipped to win here. So bullish. In fact, we put our own money into the business initially. and then we were like, oh, we'll skip the Series C, we'll go straight for a Series A. By the way, it's 2016, right? Like money's falling out of the sky, right? Like everyone and their cousin has a whatever multi-hundred million dollar seed stage startup. And so in that environment, we're like super stoked that it's going to just be a cakewalk. And I think that the sobering reality was we went to every firm on Sand Hill Road and, you know, as we talk to people, you know, the component of hardware like really throws people off, right?

1:52:41At the time, everyone's, you know, super stoked about SaaS, pure software, you know, as a service businesses, right? So that's what everyone's talking about. We don't quite fit that mold, right? I mean, we have a massive software opportunity in front of us. That's how we think about it. But everyone gets distracted by the fact that like, well, we have to make the camera to deliver the software. And so it becomes, you know, kind of very, very, you know, very tricky. And I remember it being, you know, kind of very tough when the, you know, when the team was still small, right? There was this period of time, I think it was early 2017, where, you know, the team is maybe 10 or 12 people.

1:53:19So, you know, that we've convinced to join, this is pre-seed, pre-funding. And I would go, you know, and every day I'd have some meetings, you know, whoever it was. And when the team is that small, no matter how good I am at acting, I would come back from the meetings and ultimately it's like, so is there a term sheet fill up? No. Tuesday, is there a term sheet fill up? No. April, is there a term sheet fill up? No. We are fucked. I mean, that is like literally the demeanor of the whole company. It was kind of a tough time, right? And so, I mean, look, ultimately what we did is we raised a bunch of safe notes from friends And then that kind of, you know, made payroll and got the company going.

1:54:04And then, you know, we went and raised the seed round ultimately, which first round read. And that was a good seed round. So, you know, I think we learned how to tell the story. And I think that was, you know, kind of very, very, very critical, right? I think the facts of the business didn't change. The plan didn't change, right? But how we positioned it, like which questions and how you answer those questions, you know, that mattered a lot. And I think it mattered more for us because we didn't fit squarely into the mold of what was popular at the time. So that was the beginning of the fundraising journey, which was, yeah, definitely a very stressful time for the company.

1:54:43Was there anything that you learned in particular from that about how to tell a story or how to captivate venture capitalists? I mean, ultimately, I think you were probably able to plop those numbers down in the Series B or Series C. And people are like, oh, wow, this is off to the races. But in the early days, especially the seed series A, getting those groups involved, was there something that you thought really made it click with them in a way that... I mean, I'll start from the basics, which is, you know, don't bring a box of hardware to a VC meeting ever. Like, you know, that's probably what I did on the first one.

1:55:13And I learned very quickly, like, okay, peel out and just pull out the software demo. But, you know, I think a lot of it was also about, you know, it's not so much about just sharing the facts as it is, you know, helping someone get on the train and get on the journey. And I think the challenge is, you know, I think when you go into a partner meeting or whatever group, you know, smaller group meeting, when you just share facts, I think people's natural intention or natural reaction is like, okay, well, I'm going to challenge your fact, right? And then they poke deeper and deeper and deeper into that fact until even if you're right, they're going to convince themselves that you're wrong.

1:55:57And so I think one of the early learnings was, you know, help the people that you're trying to convince arrive at the right conclusions on their own. Right. And so I'll give you an example of that. Right. Like rather than explaining to, you know, kind of a group of investors, like how a customer purchased or why they purchased, like connect them with the customer. Like, yep, you know, here's a few logos. You know, John is the guy at this company. Here's his phone number. Go call him. And then people would make those phone calls and they hear the customer and they're like, oh, wow, I didn't even think of these five things and this person loves this solution so much.

1:56:36And so now it's more of a, you're sort of leading them to arrive at the facts and the conclusions and then you support it. Then the questions come and it's like, well, how many customer logos do you have? Here's a slide on it. Who's the market? at, you know, you sort of back into it as opposed to, you know, just trying to, you know, push it into, you know, push it into people and then make it, make them, make them question it. All right. Philip, thanks for doing this. This is great. Thank you so much. It's a fascinating company you have. I'm very, yeah, I'm impressed with how you guys have been able to execute.

1:57:09You do things in a first principles way and some elements of contrarianism, some elements of, you know, rethinking the way things should be done. So thank you for doing this yeah thanks for having me