20VC: Scaling ServiceNow to $5BN in ARR | Leadership Lessons from Doug Leone, Frank Slootman and Bill McDermott | VC Value Add: Is it Real and Why the Worst VCs are "Seagull VCs"

24:24That was Gartner. It was one of the reasons we hated Gartner for a while at ServiceNow, but that was a real big blow. And we had to talk our way out of something. And now that business is much, much bigger than a billion. Given that, how do you think about analyzing market sizes and investors today? As you said, we don't see a pathway out over a billion, Gartner, specializing market sizing. How much focus do you put on market size today when investing? I put a lot of focus on how big the market is, but I also don't think it's easy to understand when it's going from an on -prem world to in the cloud world.

24:56And as it becomes easier, and anytime you make technology easier for the customer, the markets grow. And so I think that there's some value and understanding meaning, if I can consumerize something that was really difficult before, does that make the market grow? How important is market timing for you when investing? You mentioned there the speed IPO and what you want is to do. You have to hit the market just at the right time for that to be possible. For you investing today, how do you think about that? It's true. You can be too early in markets and it's hard to know right when you're too early until you make the investment.

25:28I think it's more kind of recent, says there's no such thing as a bad time, bad idea, only a bad time. Yeah, I think the pain from the existing strategy has to be understood. If you don't know what you're solving for, when I'm listening to founders, they're like, here's the reason why now is the time for X, Y, or Z to be successful. I'm going to then go validate that in our research calls with external parties to try to make sure I touch the right time. Does being a sales leader help you on your referencing for companies? Because you are, as a sales leader, probably the most attuned to people, to listening, to knowing what question to ask.

26:03It's a real art form. Does being a sales leader help you do the best diligence and reference process? And there's an art of discovery that is what we call it in sales, where you get into a conversation with a customer and you start asking questions. And that question then leads to another statement which then you can probe around and is a natural conversation like this interview is between two new friends and we have that discourse. So as I talk to them, like, okay, what do you think about this? Why is this important? How would you sell it internally? What would you be taking out to be able to afford it?

26:36Things like that become really interesting to me as I'm doing diligence. So yeah, I think it helps, but I think it's that art of the question and not being satisfied with just the first answer, but digging deeper because the truth is usually the second or third question you ask, we'll get you closer to the truth. I'm being comfortable with silence. It's one of the most important skills I think you learn as an interviewer. I suggest everyone always interviews. I think you become a better husband or wife, a better friend. But being able to ask a question and sit in silence can be quite awkward, but most often magic leads after the silence.

27:12Yeah, you don't want to talk just to hear yourself talk. And I tell sales people all the time, like, hey, you got two ears of one mouth, spend equal amount of time listening or the two ears is talking, you should be asking questions not just talking. That will get you closer to a motivation, truth, a reason why to buy than just by talking. So I'm going to push you a little bit. What's a big mistake that you made with service now when you think about the mistakes made in that journey? I know it's all up into the right. I know the numbers show that, but everyone makes mistakes. So we made a mistake.

27:45We were getting pressured downmarket from what I call low end competitors. But we started getting worried because you know if some of these people could get traction down there Would they ever be able to go up into our customer base? We were worried about the low end We built a product called service now express it was written by the same people that wrote the enterprise product We tried to dumb it down. We did a terrible job of dumbing it down We brought it to market. It was the interest in it We were selling it for 10 to 15 thousand dollars versus 50 thousand dollars at the entry price did a lot of transactions and made a lot of companies unhappy.

28:19Product wasn't easy to use. It became a burden for us on support. And quite honestly, we were an enterprise company trying to act like something else. And what I realized is there's 10 competitors down market. Let them go beat the crap out of each other down there. They'll drive all the investor dollars into the toilet and we'll just sit here and focus on what we do really, really well and own the market with the matters. And so that's what we did. We exited a market. We made that mistake. How quickly was the mistake apparent? Probably in the six months. We just didn't want to hear it. How long does it take to make the decision?

28:54About a year and a half. I've had less. Yeah, I mean, we are pretty ruthless about decisioning. And as I said, one of our strengths was make decisions quickly. The same time we had to be bold enough to say some of the decisions I made of the journey aren't perfect. One of the biggest mistakes I see found is that we invest in stays. They want to expand customer segment too soon. They want to expand into enterprise too soon They want to expand into SMB from enterprise too soon. I always say it is so much deeper and richer than you think And we've only penetrated one percent of it But let's absolutely double down where our strength is.

29:27How do you think about one is the right time to expand customer segmentation? And when is the right time to say no? We're gonna focus. Well started happening at ServiceNow that we took advantage of was our customers started using our product in places it wasn't originally positioned for. Turns out that by 2015, we had hundreds of customers using us in new ways. And so what we started to do is just listen. And then we productized what they did and built full -on customer service product, full -on security incident, vulnerability products, full -on HR employee experience products. And because we just followed the customer, we had better success.

30:04That was not easy because we ended up creating business units. I had a comp of the different selling model to sell new technology because the buying persona was outside of the core. I didn't do it until I was fairly penetrated and winning an ITSM. If I didn't feel like I was already winning there, and it was not a distraction, then I could do it. Service now to stay and service now while you're there. I mean, it has so many products. It's incredible. My question to you, how do you win with so many products? It is a difficult product marketing challenge. It's a different, difficult -goated market challenge.

30:36How do you think about the lessons since from this insane multi -product challenge. I think a lot of it has to do with how we manage our teams and what we did from an extreme ownership perspective. There was one metric that mattered to everybody at ServiceDown. In fact, up until recently, they had a bonus profile that was every quarter we would fund a bonus pool based on the company's achievement of NetNewACV, which was new business minus any churn. So everybody was worried about churn revenue and top line revenue, right, new business. So everyone was focused on that. Then as we started to launch these new business units, I remember when Frank and I were talking about it, and this is Frank's genius, he did it before John came in and it was like his parting gift to the business that is still sustainable today.

31:18We said, we need people that are going to wake up in the morning and care about this, because I had a business that with ITSM and with our IT operations management products, my reps were already blowing out their numbers. So I needed to worry about the strategic issue two to three years from now. If that market ever slowed down if we got penetrated what was going to be the next act? And so we actually launched four products at the same time in 2015. I thought we were going to kill two of them to for me to be viable. It had to be a hundred million and three years That was sort of the goal we had for each of these things zero to a hundred million which would be equal to be Some of the fastest growing startups in the valley ever right take a product from zero to a hundred million and three years We were doing that inside of service now We did all of them at the same time.

32:00That was really, really friggin hard. What percent of that revenue is from net new customers versus from existing that you have the benefits distribution to in the early days, I would say byproduct was different. And all of my reps cared about all the revenue. So we had a land expand retain model. We did not believe in customer success. We can talk about that too if you want. And so every rep, every SE was responsible for the full lifecycle of customer. From the first time you got them excited about the idea of something to the time where they'd upgraded many, many times and bought other products.

32:32That's what I wanted from the people. I cannot not to ask that. Why not believe in CS? We had Chris Degnan on from Snowflake and he's like just completely denigrated CS and said that's why we don't have it in his bullshit basically. Frank and I, when we got to service now, there was a group called customer success. What I found in that group is when I asked them what do they do? They basically did three things that should have fit into other groups. They either were taking calls from customers saying something's not working, help me support me, our support department was woefully under resource so they weren't getting the responsiveness.

33:07So that job should have been handled by support. Get rid of that, make support to that job. I want to add more capacity. You're doing well. How do I add more licenses? That job should be done by sales. How do I configure something in my system? I'd like to help hands on keyboard. That should be a paid for professional service. So we got rid of customer success because quite honestly it was a make -believe organization that didn't need to exist. A lot of people get excited about it because they're worried about the churn in their business. We were 98 % plus renewal rate. So I didn't have a churn problem.

33:38How are they going to show up and say what did I do that was uniquely me that was different that I could measure and get outcomes. I could never get customer success people to tell me What they actually did during a day that made us make money and so to the same problem that I said people buy product to make money save money I had another problem. I had it fund more people in support I had a fund more people in sales and I had to build my professional services a partner ecosystem So I got rid of it and I brought it back slowly over time in very boutique ways But the customers actually paid for those resources not given away.

34:13Do you think with the companies you went with today, do you think they should have CS teams? No, I think that many of them are coming to the same realization. I was talking to one CEO of a fairly largely scaled SaaS company and he told me we are going to be revisiting these decisions. It's fun because you know, I can't say to people I told you so, but I start planning the seed. What are they doing? what's your metric, how many do you need, what's your factor, most customer success organizations come at it with, hey, I need this many people for this many accounts or for this much revenue. In every organization, I think, how do I become more efficient over time?

34:49And so every structure I've done to drive efficiency, how many dollars per sales head count on my driving, how many dollars of revenue I'm driving for every engineering resource, revenue and finance. So if I can't get efficiency, I'm not doing my job as a leader in a business. We have had many people from Founder's Founder in the past, including your Brian Shingamans of the world, who very clearly has the belief that the best Founders do not need help. How do you respond and think about that? My first response is this is probably because he doesn't know how to help. I think everybody in life could always use a friend to talk to, could use an honest conversation, and there is a difference by the way between Founder Friendly and Founder Helpful.

35:27I think I have to walk the line between what I call Founder Friendly, I'm in your camp, But I'm gonna also tell you the truth and I'm gonna get you ready for what's coming and sometimes that truth is hard to hear But I got to be doing that and you have to know as a person like me that your job is not to do it for somebody Your job is to coach guide Consult be a mentor almost like being a grandparent versus a parent What was the whole of this thing about making the transition? Learning that I wasn't an expert learning how to have a beginner's mindset on something not get the accolades. I used to travel into London or Japan and you know there'd be a whole team of people waiting to meet me and you know fancy dinners and car service and all this other stuff.

36:09This is like hey you got to start again at the beginning add value, figure out your value to those people and not come out with a massive ego. I'm sure you know we have many mutual friends who have bluntly very powerful. I'm sure you have many powerful people tell you advice on entering venture. What advice did you get? Most of them said, don't do it. Most of them said, you're at the apex of your career, you could go do a CEO job if you wanted to, go be another president or CEO, every company out of the sun wants to recruit you. And to be clear, everybody called like you name the top company in the valley.

36:43They all called me looking for me to join the companies. It still happens today. I am making a conscious decision that at this point of my life, this is what I want to do, and I'm having a lot of fun doing it. How quickly do you know whether you like investing or not? Oh, I think it's taken me a couple of years because I went through a bit of a cycle in 21 when I joined. It was, let's get deals done, there's a lot of pace to it. That was kind of fun. And what I figured out really quickly was. How long did it take for you to do your first deal? Probably too quickly. I did my first deal on about two months.

37:14You said before that your home is generally kind of series B, maybe series C? You know, we had some from Greylock on the show and he said that actually this vintage of series B and C would not be positive cash returning to LPs. The entry price is too high with revenue multiple compressions being where they are from public markets. It's just too difficult to make money. Do you think he's right? I think you have to be careful. Every opportunity is worth diligence on its own and you've got to be able to underwrite what you think the value is going to be. The biggest risk factor is something starts slowing down before you expect it to.

37:48So you make the investment, you think your model it out is going to go from X to Y to Z, and we usually even take a haircut on that model from whatever the company tells us. And for whatever reason, it slows down too fast. And then we don't get to the kind of return multiples we want. Again, Entry Dave Schneider. My job is to help you make sure you're hitting and beating your revenue goals. Again, if you're a Series B or a Series C founder, the opportunity is right now, pick the right investor for this stage of your company that's going to make a difference in your business. What are the biggest reasons businesses plateau?

38:21We see so many between 50 and 100, where the growth just comes off a cliff. What are the reasons why those businesses plateau at that stage? First, do they know their customer? And who are their customers? If you are a business selling to other young technology companies, and that's your source of revenue, I'm going to discount some of your future opportunity just from day one. If you had shown me proof of selling to the large enterprise or a combination of size customers, I'm going to believe that we can sell to other like size companies in the future. And the smaller companies are more susceptible to the waves of the market, especially with venture funding being hot or cold at any one point in time.

39:01If you started winning in pharmaceutical on banking and other big verticals, I think it started to get more applicable and it stretches out more. Who are your customers, the source and quality of the revenue? Have you been through a renewal cycle yet? Is a big question that a lot of investors miss? I'm looking for, have they gone through a renewal cycle? What happened to the ACV grow at that renewal? Do they add more product to it or did it shrink or not renew? If it didn't renew, that's a big problem. So the renewal cycle is a big pushback on the 3A contracts because you don't get the feedback as frequently as you would an annual.

39:37How do you think about that lack of feedback from the longer cycle? So you start seeing it in NRR, right? So even in year one, it's service now when we sold a contract, it could be a million dollar contract. We never really fully sized what the customer could be because they didn't even know. They were expecting it to be a certain number of users, what have you, what happened in service now? Once it got implemented, more people would start showing up to use it. it would grow. So six months after the go -live of the system, we should see 20 to 40 % increase an ACV size. I'm looking for something like that.

40:10Did they have this second product that came out? Was it welcomed in the market? If you didn't have a great first experience, you're not going to say yes to the second product. There are ways even in a multi -year relationship to start seeing upticks and revenue from those customers. What happens to the generation of companies that have raised at very high prices, largely from 2020, 2021, and they've kind of plateaued and they're not moving into those valuations. What happens to them? Is it a roll -up play? Where do they go? I think we're in the process of figuring that out. Some of them are re -excelerating the growth right now.

40:42That's one category. Those should be fine. I really believe some of those are going to come out really, really good and they'll be better for this journey. There's a few others where, yeah, I'm not so sure. I would honestly say they're probably worth more as cash and they are as independent companies and some of them I've made the choice to refund the cash back to the investors sell off the assets There's a couple out there that that's happened to recently and then there's a few others that maybe they'll use the cash To come up with the second or third act, right? They've got enough if that founder has the fortitude and wants to continue on that journey a lot of the founders are like boy this is hard.

41:20I'm not so sure. I always think a 10 billion dollar company needs a second or a third act. And I always say the difference, you know, a billion dollar company, a 10 billion dollar company is a founder who's able to transition between chapters. That is it. Yeah, I can see the logic of that. I think it's rare that your first product's a billion dollar product on its own. There are some billion dollar company, not billion dollar revenue. I'm talking billion dollar revenue. Billion dollar company. I think you could do with a single product. Exactly. I'm saying $200 million revenue. Yeah, that's not a problem.

41:49I think about valuation a lot and I think about the steps that you need to do to get there. Have you done a deal yet with the benefit of hindsight? You're like, oh, fuck, I paid to your price. Oh, sure. In 21, I definitely feel like sometimes that time in place, we probably paid to your price. At the same time, because I was worried about that, I missed a couple at earlier stages where I thought they were too expensive. And I came back, I looked at them in the A, I looked at them in the B, maybe looked at them at the C, thought they were expensive every way, and then body in at the D. And built relationships with people were like, okay, these guys have continued to pivot the right way, and it's expensive for a reason.

42:34And when you have that combination of founder, market, team going on, then it's probably worth spending money on. But you gotta get really convinced that that team and that founder has got what it takes to keep going forward and making it. Is it harder or easier to win deals than you thought? I think every great company is competitive. There's a lot of dollars chasing deals. Do you think every great company is competitive? It's rare. I've had founders specifically tell me they want me on their board. And so then it's a question of can we get close enough to what expectations are to what makes sense?

43:11There was a specific situation where it was a light speed earlier stage company, the founder was selecting for. Board members that could help scale the company and help with no route to market. He selected Carl Aschenbach and myself. We split it around with Sequoia 5050 and Carl and I both joined the board. Probably the two, I can say this for sure with Carl. One of the best executives out there who knows more about revenue generation and leading companies than almost anybody in the valley. So to be alongside of him on this journey and build out this company or after a quest of this founder was phenomenal.

43:48How much ownership do you need to be in that position? It's got to be worth your time. It's got to be worth my time. I'm typically in a growth deal trying, if I'm going to take a board to see it, it's usually a $75 million check. I'll break the rule and go to 50 sometimes, but mostly it's 75 minimum with the goal of doing more over time before it goes public. So you're wanting 10 % ownership? Ownership percentages aren't necessarily the most important things. I want to be in the right vehicles, in the right places, and have enough money to work to make it matter. How do you think about upside then?

44:17When you think about what is good enough and what you need it to be to be attractive enough, I'm sorry for asking because in really early stage problems we talk about ownership is kind of the core focus. And so for you I totally get in terms of kind of dollars invested as the core focus. But what is that upside requirement then? Is it a five or ten -hakes? Yeah, we're usually in growth trying to underwrite can it be five to 10X outcome? We have a kind of a view of what we call super stamps, the companies that we really want to be in that are the future IPO companies. And those may not have the same direct return, the risk is much less.

44:53And then there's the what we think are the future franchise earlier stage bets that we're going to go in and kind of layer in over time and look for even more upside. So we kind of bifurcated our growth view a little bit trying to do right by our investors and right by our portfolio. How do you think about concentration across rounds? What do you think about reserves today? How do you think about that? Is it a kind of one and done we like to put 75 in? Or is it continuous across rounds? It's continuous. It doesn't always mean we participate every round, right? So sometimes things get too expensive and we'll make a choice that our risk adjuster rate or return for that deal isn't something we want to pursue at the same level as we would have been earlier around.

45:31We will try to participate every time we can. And if the prices are right, and the business is executing well, we're gonna definitely layer in. We have a fairly significant size fund, so we've got a lot of powder, but it's very important that we get the kind of returns we need. How quickly do you think you know it's a good investment? I take the view that actually you know in three to six months. I was gonna say, usually three to six months, you undercover all the words that you didn't see that they hid from you on the, in the diligence process. I've had assumptions not be correct. Assumptions we made on a deal that didn't come to be something changed really fast in the business.

46:07And you saw that with a lot of what we call the COVID winners and then the people that now the COVID is sort of in a different chapter. Their business isn't acting the same as it was before. Jason Lankin, who's a friend of mine, I'm sure you know him from kind of the sassy system. He was says, he says, I've stopped giving feedback. I don't give a feedback. Maybe the nicest founders will say thank you and then not listen, but everyone else just says, but me, go away. And feedback is not appreciated. To what extent do you agree with that or disagree? Feedback when you decide to make an investment or when you decide not to make an investment.

46:38When I start with, when you decide not to make an investment. I try to call every founder, thanking them for the time. How many founders do you meet a week? I'd say between four and eight. Now, if I'm not the one leading it, my partners who are leading it, I'm sitting in those meetings. So if it's one that I'm leading, I'm going to definitely make that call. but I also tell people even if I don't make the investment call me sometime and that's a test I want to know if they're thinking about me as a resource because maybe there's something about it where I just didn't have the conviction yet But I still want I'm curious enough about the business and I'm curious about them on are they gonna ask me smart questions Are they gonna engage are they gonna understand the value of David Schneider and co -to or you know one of my partners on their cap table.

47:20And if they do, then that's great. And if they don't, so be it. I'm always in the business of matchmaking, right? So I've got this massive network of people that used to work for me that are always looking for jobs. So if somebody, again, not even in my portfolio, it's like, hey, I'm curious. I'm looking for this happen last week, looking for a sales leader in Chicago. I'll hit my Chicago roll index and say, hey, there's five guys in Chicago that are worth talking to. I'll make a couple of introductions and go on the way. Have you lost a deal yet? Partially. There was a deal that I got really excited about.

47:51When it came down to valuation, we did not hit the number that the company wanted, and I'm sure that I missed it. So that was one that I probably dodged a bullet because it was the height of 21 in the billions of dollars, and we just looked at it and said, it's just too rich for us, and we walked away. After being told, he wanted us to lead it, and then we walked away over price. So that I was a good learning opportunity, but I don't know if that's a loss. There's another one where we got smaller positions that I wanted, and that's a really hard part for me, Harry, because if my position's too small, it's hard for me to dedicate the time.

48:28And so I have to try to tell these founders, you know, this is going to be awkward. I know you want us. You want me on the board, but I can't use one of my spots for that subject. Why don't you just say no? I know, because this is the hardest thing. I'm by no means the OG that you all, but I have zero time. I'm like, no. I've said no a couple times. And one that I said yes to, I do think it's gonna be a generational company. And I really love the founder. I've known him for 10 years. So it's one of those where existing investors preempted around. We got a smaller piece than I wanted. There was a commitment to try to drive more.

49:03It didn't happen. And so now we've had the honest conversation about, hey, it's gonna be harder for me to spend the kind of time you need. And unfortunately for him, he's in the process of needing that help. but I got to figure out what the right thing is. I want to be friendly, but I also have a business to run and I got to watch my time. Do you share vinyl courses view that 90 % of VCs detract value? My terminology from experiences, there are VCs that are seagulls, flying a meeting, flying a location. They basically take a shit and they fly away. They talk a lot, they give work to do for other people to do on the management team that distracts the management team from doing anything that's important.

49:40and you've got to control for the Seagull. This goes into the quality of the board that you're bringing on and the kind of people and also goes into as a management team, you need to set the tone and set the agenda for what's important to you. So for example, when I led the review of any portion of service now or did it remain, I started with the three things that were working that were really green and the three things that were red. If somebody wanted to help me on something in the red, be my guest. But if you wanted to bring another thing on my list, it wasn't welcome because I already know my business.

50:14And so having the confidence as an operator to say to the board, this is what's going on in my business. Here's what I'm working on. That keeps the seagulls away. There will be so many founders on their way to the office listening now going, that's my fucking boot. That's my boot. What would you advise them come with the three reds and the three greens? Control. And I think it is really important to control what you want to have a conversation about. Set the agenda spend time before the meeting talking to people what you want to have a conversation don't surprise people Give them time to do the pre -read if any board members coming in without doing the pre -read that shame on them You actually don't need them.

50:50They've got to do the work too. I always say cool each board member up before and it can be five ten minutes But just like hey David What would you like to achieve out of this board meeting you say hey? I'm worried about ourselves efficiency Great. Why didn't I address that with you now? Have you resolved that? Yes, great then we don't need to take it to the board. Yeah, sometimes it needs to be at the board being, sometimes it doesn't. I do think it's up to the management team to drive the clarity of thinking and avoid when you're interviewing potential board members look for relevant experience.

51:19Not the fact that they've been on eight other SaaS boards, but have they ever done anything themselves? And I would just call that out. There are now enough people on the venture and growth investing world where people have had hands -on experience that you should drive from. And some people don't have it. And so it's that kind of a nice mix that you want to look for. I'm gonna do something really unfair. Three board members that you most like to work with. Oh goodness. Well, so Doug Leoni was on my board at ServiceNow. He's on two boards I sit on now. He's phenomenal. Love working with him. What makes him so good?

51:54He's got wisdom. He's practical. He also knows just about everybody and can get people together on topics very quickly. And he doesn't tell people what to do. He gives them ways of thinking about it, which is what I try to do as well. And he's also patient but demanding, which is kind of a little bit like me too. Like, you can be demanding, but you have to be patient understand the cycles. And he's incredibly responsive. If I make a phone call when I was at service now to Doug, and it was very rare, usually he was calling me for advice. So he was responsive to me at wherever he was in the world with it, seemingly like 15 minutes.

52:30I would say Mike Volpe, who's now, I think in the process of retiring from active doing new new boards, he brings an operator mentality with him. The other guy that was on one of my boards, a Neil Bushry, who no longer does this as a living because he started work day, but he was on my day to the main board. And he was awesome. Because of all the people he convinced the engineering and product team before they start putting hands on keyboard to go spend 100 conversations with customers to know their problems. And I think so many founders get it wrong. They rush to start building a product without knowing the customer and knowing what you're building for.

53:03That kind of advice is so practical still to this day. And I think that's a lesson I learned from a deal. What advice would you give to me on what I can do to be the best bull member? Everyone has a superpower. And I think everyone's job is to find their spike and try to leverage it on behalf of the companies and people that they're dealing with on a regular basis. For you, it's probably a bit of the networking that you have and your perspective on the world, your PR capability from what you do here at 20VC is pretty amazing. And I think, again, pattern matching for people because you're seeing so many different situations.

53:38Do you find pattern matching hard as an investor now because you have Eat your Sluteman, your Bill McDermott, you've got the best of the best CEOs in the world. At a point in the career though, where they've seen it all done it all in their OGs, And then you're kind of translating that to a 30 year old founder building a B2B product and they might just be as good They're just earlier on the curve, but you're doing a like for like given the experiences that you have is that hard? I don't compare the Frank Slutman that exists today after three IPOs to the founders that I'm working with at a series B or a That's that's not a fair compare I can compare because I worked with Frank.

54:14It did it. I mean was this first CEO job and how he was and what he was doing to drive urgency see. I've got to ask about two people and then we'll do a quick five, but one is the Lefondz. You work with them now. What are the biggest takeaways from working with them? The reason I picked Koto out of all the firms I was looking at was they themselves are innovative. They themselves are entrepreneurial. They themselves are trying to build the best company in the world in the categories that they serve. They're not afraid to try something. And Thomas had great vision. He said, the color of money isn't going to change.

54:46It's going to be green, in the case of the US dollar, but the way in which we can service our investment will have to change if we want to be world class. And so he went out and recruited guys like me and Dan and Karen and others to join the firm to make us different than everybody else who is just doing traditional growth investing. I want to do a quick fight because I can talk to you all day. So I say a short statement, you give me your immediate thoughts, does that sound okay? Sounds great. Okay, so what do you believe the most around you disbelief? People are the different makers. If you can get a group of people together who have a lot to prove who really have the hunger to do something That can really make the difference in a problem and he got to let them run at the problem Biggest lesson from flying a hundred thousand miles a week.

55:30Yeah. Now the biggest biggest lesson is you're there for a reason It's to go talk to customers and in part your wisdom on the culture of the company every time you're in a city Don't waste any moments. If you're not having a dinner with a customer, have dinner with employees or partners, understand that the time, the windshield time, and a car with employees is valuable. Don't be distracted by your phone or your social media. Talk to them at their lives, talk about their hopes and dreams, and what you find is people are fairly aligned. We all have similar hopes and dreams. We may want to get there a little differently, but it's financial security for our families.

56:06Doing interesting work, maybe get promoted, taking a couple of occasions a year. Those are the things that tend to be the most common and you can really sink into that with everybody. I always find it funny, someone said to me the other day that we spend our whole childhoods trying to fit in and we spend all of our adulthood trying to stand out. I went from wanting to be liked to wanting to be respected and that was a very important lesson as I went from an individual contributor to a manager to a leader. Respect is something that's earned. That's the most important thing. Do you agree with the shit sandwich feedback now?

56:39Yeah, shit sandwich is like, oh, David, you did really well here, but this wasn't great, but overall you're doing great. I'm maybe I'm just getting old and jaded and cynical. I don't have time for a shit sandwich. David, this could have been improved. Why wasn't it done like this? I'm a believer that feedback is a gift and it needs to be given frequently and as quickly to the situation as possible. And there are moments where I need it too. and I've gotten it and I've made massive corrections on my behavior. I was the biggest correction you made on your behavior. It's still embarrassing. Yeah, for.

57:11Okay, so my shit sandwich moment, early days at DataDemain. I was really nervous about getting the product deployed and getting a couple good experiences going. And we had a proof of value running at a very, very large national lab in the Bay Area. And the product was not working the way it was supposed to work. In fact, it was a disaster. And I'd come from big companies where a response from this between sales and engineering was slow. In my old company, big company mentality, I sent an email and I sent it with about enough flames on it that would catch a mountainside on fire. And I sent it and copied Frank Sleutman thinking that Frank's gonna have my back and he's gonna force them to go pay attention to me.

57:54And I was like, okay, Frank comes marching down to my office, Close his door and I thought it was going to say what can I do to help you? Instead he said if I ever see another fucking email like that, that will be the last email you send here. He goes, these people have been building this product for three years before we showed up. Given the chance to be successful, get up out of your chair, go talk to them. Asking to go visit the customer with you, solve the problem. I immediately went over to all those people, apologized, brought them donuts and other things the next day trying to rebuild trust because I did broke trust.

58:25And I should approach it from a human perspective. I need help. Can you help me? Within three days, we got that thing working, flying colors, sold a bit the biggest deal we ever did in the company's history. We learned a lot together because the feedback was so instantaneous. It allowed me to fix something that I could have created a mortal sin around. And I tell people all the time, do first person in conversation. Don't send email. Talk to people, pick up a phone, go meet them if it means flying across the world to go have that conversation. better to do it that way than having an email. When's Leetman's pissed?

58:59Is everyone scared? It's not a pretty thing. When I'm pissed, everybody's scared. I mean, we, I mean, the part - When you friends, you seem so lovely. Yeah, I'm a teddy bear until I'm not, and then I'm like a grizzly bear. So, and that confuses people, because I really do care deeply, but there are things that are unacceptable to me. And, you know, now in hindsight, I totally understood where Frank was coming from, And I respected him so much for coming to me right away. He fixed my behavior. He made out of you remember that conversation, but it's one of the most cementing moments of my life around how to build great culture in a company and how to destroy culture in a company.

59:38That was a massive learning opportunity for me. I'll never forget it. Building my job at one of the most hailed CEOs of our time, biggest takeaway from working with him. I worked with Bill at the end of my service now career. He joined in a kind of weird situation. which we had John Donahoe, who's a great human being, great CEO as well. So now the CEO of Nike, John was on the board at Nike, got the offer of the lifetime to go be the CEO of Nike. It was something he'd always been interested in doing. And so he took it, Bill gets parachuted in on our third CEO transition in the 10 years that I was there.

1:00:10And what really is apparent to me is, Bill understands enterprise SaaS. He understands sales as well as anybody. I'm really good at selling. Bill may be even better, which is hard for me to admit. I think that's how you get it, starting. Creating stories about understanding customers, listening, meeting them where they are, trying to solve the business problem. Then Bill is just really smooth. Like I can sometimes fumble over a word here and there. I've never seen Bill fumble over any word. He just has a certain way about him. And then his relationships with executives is second and on. He spent I think 10 years at SAP, He knows every large CEO, large company CEO, CIO, world leader on speed dial.

1:00:52He's just super connected. So as a CEO and a company of the size of service now, at times we need help getting to a board level discussion because the funding decisions are so big. We're talking 10, 25, 50 million dollars a year, sometimes for these transformational efforts. That's a big lift for any company. Final one, what question are you not asked often whatever that you should be all more. That's a great question. Part of my superpower and it's part of what drives me, I fear failure, even though I don't know what it looks like. Meaning I'm afraid of not doing my best work and somehow dropping the ball or disappointing someone or something in the process.

1:01:35And so for me, it's this drive to constantly think about all the different possibilities So I can do the best job of stewarding a team myself through a situation and get to the outcome. So, you know, when I go to sleep at night, I'm thinking, yeah, the day was pretty good, but I'm also thinking about, okay, what do I need to do to improve for tomorrow? And how do I make it a better day? And I think that's part of who I am. Now, I've tried to harness that in some kind of mindfulness exercise, be a little more sane in my approach. But I was always kind of unsettled thinking I needed to do more was part of my my issue I found the most reassuring thing the recognition that 90 % of your worries have never actually happened Yeah, and anytime you get close to one of those worries happening.

1:02:22It's it's a scary thing You know, we all have our foibles and we're all as I said we're all survivors of something We have to grow from every experience. I think as I've gotten older one of the things I've realized is the past is past What did I learn from it? How am I going to adopt it going forward? And now when I work with executive, we're debriefing about it quarterly, the thing I'm really looking forward to, what do we learn from the last 90 days? How is it going to change our approach for the next 90 days or the next year and how are we going to build from here? I don't want to spend too much time worrying about the past.

1:02:53I want to build from what ever just happened and go forward. And I think that's a very powerful way of positioning that insecurity into a strength. And I'm trying to deal with that. Thank you so much for being such a great guest and I so enjoyed having you on. I love listening to your podcast again. I learn along with everybody else's listening to your podcast. So thanks for doing what you're doing and I appreciate it. I absolutely loved having David on the show there. What an incredible operator and just 30 years of operating experience to learn from. I want to say huge thank you Tim for joining me today.

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