a16z Podcast - a16z Podcast: What Time Is It? From Technical to Product to Sales CEO

Episode Date: May 20, 2019

with David Ulevitch (@davidu) and Sonal Chokshi (@smc90) Since the startup (and founder) journey doesn't go neatly linear from technical to product to sales, tightening one knob (whether engineering or marketing or pricing & packaging) creates slack in one of the other knobs, which demands turning to yet another knob. So how do you know what knob to focus on and when? How do you build the right team for the right play and at the right time? It all depends on "What time is it": where are you on the journey, and where do you want to go... In this episode of the a16z Podcast, general partner David Ulevitch (in conversation with Sonal Chokshi) shares hard-earned lessons on these top-of-mind questions for founders; as well as advice on other tricky topics, such as pricing and packaging, balancing between product visionary vs. product manager, how to manage your own time (and psychology!) as your company grows, and more. Much of this is based on his own up-and-down, inside-outside, big-small-big-small, long journey as CEO (and CTO) for the company he co-founded, OpenDNS. The company was later acquired by Cisco after it pivoted from consumer to enterprise. Speaking of, what are the latest shifts and nuances in selling and buying enterprise products, beyond the phrase "consumerization of enterprise"? Or beyond the cliché of "design thinking" -- how does one go beyond user experience and beyond things like fun gifs (which are pronounced, ahem, "jifs") to focusing on the whole customer experience, and earning the right to be complicated? All this and more in this episode... plus the magic 5 words that will help any CEO (and anyone, really). The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi, everyone. Welcome to the A6 and Z podcast. I'm Sonal. And I'm here today with David Yulevich, one of our new general partners who covers all things enterprise. But honestly, that can mean so many different things to so many different people. So we briefly discuss what enterprise products really mean today for entrepreneurs, companies, and users, especially

given the latest shifts driving SaaS beyond the cliche of consumerization of the enterprise. We also cover specific advice on the topics of pricing and packaging, how to balance being a product visionary with being a product manager, when and how to scale out and hire your leadership team, and how do you know that's working or not? Plus how to best manage your own time, and your own psychology as a leader while doing all this. For context, David founded Open DNS, where he actually went through a rough period in going from CEO to CTO in 2009,

and then back to CEO again, in a company that itself pivoted from consumer to enterprise. We discussed how did he make a comeback? I mean, it's not like he changed instantly overnight. So what and how were the lessons learned? In 2015, Cisco later acquired Open DNS, and David ran their security business, where he also led the acquisition of three companies before coming here.

So he's seen startups from all sides, from being acquired to being the acquirer, from small to big to small to big again, from on the inside and from on the outside. But the real theme of this episode is the journey many founders make, from technical to product to sales CEO. And while we end with the story of open DNS and the most important lesson learned there, we begin with what is the one piece of advice David has for founders? So I think that there's not usually like one, I'm not a big fan of the like platitudes where you just like say one thing that applies to everyone. because there's never one thing that makes the difference between success and failure. As a founder, generally you're at different stages of the company building journey. Sometimes you're a technical CEO trying to build a product to make sure it actually is feasible. Then you're constantly in the market with customers, doing customer discovery, making sure that you are solving the problems you're trying to solve.

You end up becoming sort of a product CEO, making sure that you have product market fit. Then you end up becoming a sales CEO on the enterprise side where you're trying to generate revenue and figure out how you can go acquire more customers. And then if that works out, you become this really general sort of manager, go to market CEO, and you're thinking about how do you scale and accelerate a business? And so I like to think about those different journeys as where there's like the right decisions for the right time and really trying to help founders understand like what time is it and where are they in that journey and where do they want to go? Is it possible to be all four at once or is it really tied to the stage of the company? So generally you want to be more focused than less focused.

And the reason I think you're probably also not all those things at the same time is like a company is a set to me. you have these like interconnected little knobs. And you can never just like optimize one and then forget it and not come back to it. You end up going to another knob. Like if you fix pricing and packaging, then you're going to control panel. Yeah, it's like a control panel. Then you're going to move to demand gen to try to like increase the top of the funnel. And if you fix that, then you want to make sure that your SDRs and salespeople are like making

sure that are converting on the marketing leads into qualified leads. Then you're closing. Then you're doing customer success. And like once you tighten one of those knobs, it just creates slack in one of the other knobs. So you might switch those hats from time to time. But I think you're rarely going to be wearing more than one of those hats. at the same time. So I have to ask this then, since we're going with this theme of let's not do the platitudes, a lot of people say it's about the customer and the customer journey and understanding

the customer. Honestly, when I hear that, I'm like, they can pull you in a million different directions. You don't even know what to do, especially if you're a technical founder. You don't know to sell to Fortune 500. Like, there's a bit of a chicken egg. So how do you sort of figure out how to sell to the right customer? It's okay for a company in the early stages, not to know exactly who they want to go after. But they do have to understand the consequences of the customers that they're targeting. I think we're living today in one of the best times to be an enterprise software startup. And to me, one of the reasons is that we're, because so many companies today are SaaS and subscription software companies where there's a recurring revenue

component, it's better for the customer because they know that the customer experience is going to be good or they'll stop paying for the subscription, right? It's a repeat business. It's a repeat business. Right. I never think about the first sale when I look at a business. I always think about like, what are you going to do in year two, year three, to make sure you renew the account, to grow the account. It's actually, it's a way of peeling back that I need to figure out, like, how confident are you and where your product is today? Because if you say, oh, we're only doing three-year contracts, well, is that because it's really hard to implement and tough to get customers onboarded until you need runway to get them happy? Or is it because

you think you're overselling your capability set and you just don't want the customer to figure it out within a year and not renew? Yeah. But if the startup I'm talking to says, oh, well, we did a couple three-year contracts, but we realized that we were priced really low. And so now, if a customer wants a three-year contract, we're actually going to charge them more in the out years. Well, that tells me your product is really good and getting better. That's fascinating. Another way to think about that is that what used to just be like a product experience is now much more of a customer lifecycle experience. It starts before you sell, building evangelist, then there's an onboarding part, then there's making sure the customer's really happy. How do you market to your

existing customers to make sure they're getting full utilization of your product? And so that customer life cycle makes it much easier as a startup is getting started to start to really identify like who is the target customer and then thinking about does that actually map to the business I want to build? Is it the big fortune 500, the global 5,000? Is it SMBs? Because it has all these like downstream effects. So a lot of startups will they'll come in here and in my first six months here I've now met with over 200 companies. And a lot of them like they really have like this ambition to go after SMBs. And one of the cool things about SaaS is that SaaS can take something that in the olden days of enterprise computing, you'd have to like buy the biggest server, the biggest

box to get the best solution. But with cloud and with SaaS applications, you can now have the power to get this massively great CRM system or this massively great HR system. I actually like to think about it as SaaS is very democratizing. SAS is totally democratizing. Because it enables smaller and medium-sized companies to have the accesses to big company resources. They don't have the in-house engineers, but they can essentially as a service it into their company. Absolutely. Small companies have unlimited compute. They have unlimited storage. They have unlimited. limited bandwidth now. And so when I meet with startups, they often want to like ambitiously and altruistically, I want to go satisfy this pain for SMBs. But it turns out that the reality

is if you want to charge a high price point, if you want to pay an expensive sales force, then you're going to realize that your average deal sizes have to be higher. If I really want to go after a target market where the price point's going to be lower, then I have to think about bottoms up sales, about self-serve offerings, because I'm not going to be able to afford to have a Salesforce or a huge customer success engine. And so I love when I see startups that think not just about who they want to go after, but then they build that into their whole sort of customer experience model and like marketing programs, pricing and packaging, renewals, sales, in the whole business model. I mean, nowadays, think about how many emails you get where it reminds you of a

new feature that you may not have even known existed. For instance, like, I'm using an email product called Superhuman, and every week I basically get an email from the team saying, did you know that you could use this functionality? If you press Apple I, it'll automatically route someone to BCC in the reply, or you just press Apple C, it'll copy the whole email. You don't have to select it first. Actually, I saw this awesome tweet from Patrick Culles and the CEO of Stripe, where he said, I feel like Rahulvora, the CEO of Superhuman, is essentially inventing new user experience and interaction paradigms that will eventually cascade into other products, much like Steve Jobs did with letting us learn new behaviors, like how to touch a phone.

Patrick's tweet was right on, and Rahul's weekly sort of marketing email to existing users, it helps teach me these new things that they've unlocked. They become very intuitive, but you still have to learn about them. One of the best things about building a company today is it's easier than ever to get close to customers to constantly get iterative real-time feedback, both from an analytical standpoint and just from customer surveys, MPS scores, all these kinds of things. They have all this telemetry through SaaS products where you actually see how people use the product. But the second thing that's happened is people talk about this like bottoms up SaaS motion,

but it's not always just that. It's really about making sure they understand that there are evangelists in the company that you have to win over before you're going to get signed off from the CFO, the CIO, the CISO, whoever he or she is that makes that decision, you're going to have to get some champions underneath that person to be your evangelist internally. So this is a little counterintuitive, too, though, because the other piece of advice I've often heard from folks is that the number one mistake, a lot of consumerization of the enterprise type of founders make is that they go too heavy on bottom up to the point

of ignoring the importance of top-down sales. What's your view on that? I like to frame it a little bit differently. When people talk about the consumerization of enterprise, like enterprise customers today are being bombarded by so many different vendors, their attention span of so limited that the products today, like I think when people say consumer, they mean easy. They don't really mean consumer. The value proposition that I'm hearing when I talk to customers is that the time to value

needs to be short. There's actually two parts. The first is I want value almost immediately, sometimes even before I pay for it. Like I want a trial or I want to get up and running on my own and then I'll talk to a salesperson. So the time to value can either be like T minus zero days, like negative time, or it has to be very short from hours to days. And so I always encourage founders think about. like the first hour, the first day experience, the first week experience, the first month

experience. The second part is that, like, enterprise software can get quite complex. And so, like, you know, Zoom is in the news because they went public. And Zoom's a great example of something where they earn the right to be more complicated. Wait, let's pause on that for a minute. Earn the right to be more complicated. So this goes hand in hand with a short time to value. So the short time to value gets you in the door. But we know that, like, you and I could download Zoom on our phones and be in a video conference call. And now we're like, well, wait a minute. maybe all of our conference room should have Zoom. Maybe we should integrate Zoom with our Google Calendar at G Suite.

You've earned the right to do that complexity because you've already proven so much value. And not only that, the value you get by doing the integration with G Suite or by adding some cameras to your conference rooms so that you can have room-based Zoom rooms, that complexity is commensurate with the value you're getting. And so when people say, oh, consumerization of enterprise just means it has to be easy or simple. That's not quite what it is. To me, it's two things. It's a short time to value.

And then the complexity curve is commensurate with the value. proposition. So then I want to ask you more about what that, what needs to go into that time to value. So let's be a little bit more specific. I mean, I get the point that you're talking about, it's incredibly competitive. So you've got to differentiate fast and show the value. But what are the things that drive that? Is it a great, like a cute little jiffy that, you know, that jumps out at you and like makes cute like a clippy type of thing? I mean, what is it? Like, what is that? Wait, do you say a jiffy, like a, like a giff? Are we going to rumble? Wait, I can, I don't know if we can do this. I can't tell if you're trolling me or not. We can't be. I am not

controlling you. I believe I'm one of the people who calls jiffs, gifs, not gifs. I hate that. You know there's a world of people that think they should be jay. I don't know if I would have ever agreed to this podcast if I knew you called them jib. It's like nail scratching on a chalkboard. You're literally right now in my ears. It's like someone's poking pins in it. How you've been so in your career this whole time calling them jist? I feel like I kind of hate you right now to be honest. This is amazing. Oh my goodness. You don't have any friends that pronounce jiff. I don't think so like you're you're it. Chris Dixon is he a friend of yours? He is. So I'm outing him on the podcast because I'm not going to go down in this ship alone.

We might have to edit that part out because I don't know if that can be out there. There's like this dissonance in my brain because you and him are so smart. But you also call it a jiff. Like I don't know what to do right now. All right. Okay. So Slack, for instance, they did a lot of really creative things. I remember I was at Wired and the product that we used was Hipchap.

And the thing that kind of eventually got me into Slack was a fact that you could do all these like gifs, whatever. You could do kind of more fun things. Yeah. And even, I know this sounds really... And they had the integrations. Other things could drive information into your Slack channel. That's right.

And that was not something that HipChat had for a long time. That's right. Like Google documents and... That's right. Dropbox files or even automated updates. Like, if you're a developer, when somebody would do a push to production, it could notify people inside the Slack channel. Right.

But now that's not a case where IT has to decide the integration. That's right. And they made it easy for individual users. As long as you could use like Google Off to authenticate, anybody could basically set up a Slack channel inside their organization. After a while, IT says, hey, wait a minute, we have all these teams that are chatting on this thing. They're doing integrations, files are being shared. We need to have a little bit more visibility, a little bit more access control. And even for like security and compliance reasons, it became an enterprise

sale that went wall to wall. It's now already entrenched in the organization. There's already integrations happening with some of the developer tools and workflows. And at that point, they've earned the right to be more complicated. I've noticed this resurgence. And I don't know if it's just like a zeit guys thing or just, you know, anecdotal evidence of design. focused startups precisely because of the thing you're saying, because that's one of the ways to instantly differentiate. And I think it's also design thinking is sort of another way of saying. Oh, I hate that phrase.

I know. It's like, talk about the platitude of all platitudes. That phrase drives me fucking up a wall. So here's a better way to frame it. Because I also don't like that phrase is it's really about that extension of the product experience and really taking that more holistic approach. It's not just about the UI. It's not even just about the user experience of a particular workflow.

It's about that whole customer experience. We're actually entering a period of time where more and more people in the workforce are sort of digital natives, and they want to be power users. You know, why isn't there an equivalent to like Microsoft Excel on the web? Like Google Sheets is not Excel. The current state of collaborative tools in SaaS apps is just so weak and they don't let you be a power user. It's also, I think, ignoring the realities of organizations today, which used to be so siloed and now you have people collaborating cross-functionally in different ways. You could argue that like Google Docs did create a multiplayer mode where you could have collaborative editing. but it was just such a garbage experience from a functionality standpoint.

It was afterthought. It wasn't baked in from natively. That's basically my rule of thumb for all of this. If it's an add-on, it's not important. I think that's, well, I mean, all of, I would say, Google G-suite is an add-on. Google should just shut down G-suite all together, even though the whole Silicon Valley would go crazy. Like, I mean, they're a rounding error in their business, and it's a rounding error to

productivity versus what Microsoft has. I don't think they'll do that. But strategically, it's just so unimportant for them. What I would say, though, is that I like software that is easy to use that has that short time to value, but allows me to be a power user if I want to be. And in fact, as an investor, when I talk to companies, I always try to figure out, like, what is their pricing and packaging strategy? So tell me, what is packaging is usually, I mean, it can be a bunch of things. But to me, packaging is, what set of features are you going to put into an offering to a customer? I always try to think that you want to make it easy for your customer to give you money.

Like that is sort of like a foundational principle for me. And so packages are a way to do that. We've all been to the restaurant where the all-a-carp menus all over the place. But sometimes restaurants just say, well, here's like the three options. Comes with one of these appetizers. You get this main course and you get this dessert. So if you want to make things easier for people to give you money, generally people come up packages. And the friction is removed to becoming a buyer.

So in the SaaS world, sometimes there might be a tier that says you're going to get, you know, the full functionality of the product, but you're not going to get archiving and logging and all this detailed reporting analytics. So it allows the company that maybe doesn't want to spend as much or isn't as big to get the full functionality of your product, but then there's like a hurdle. And usually when I think about packaging, usually there's like a key product milestone that happens

that forces somebody to jump to the next tier. Interesting. Like what do you mean? Give me an example of that. Well, sign on. It's a good one. Lots of SaaS offerings let you create accounts and use a product. But if you want to tie it to your ACTA directory

or some other directory service, you're going to have to jump to a much, more expensive tier, but generally the customers that have to jump that tier are more enterprise companies. They have a directory service. They have a single son-on service. They might want two-factor authentication with tokens. The security person in me doesn't love that one being a tier. I always think you want all your customers to be secure. But there are other tiers. So like compliance. If you're in a regulated industry, you might not just be satisfied with 30 days of logging. You might need 365 days of logging. You might need to be able to export your logs to another

data store. So far, if I heard that as an entrepreneur, though, I would assume that all packages are tiered? Are there untiered packages where it's just like a different combo that's all like kind of horizontal? You know, I don't think I've seen that. Generally, it's much more of like a ladder where the next package includes everything in the previous package. Got it. And I think that while there's usually a number of features that get unlocked when you go to the next package, to me there's always one that has that forcing function. And in fact, when I think of packaging, it's oftentimes a way to segment your customer base because you're going to say like we know SMB and midmarket under 1,000 employee companies, they're going to be at this package.

Everything we do, the product manager in that package is thinking about those features, thinking about that persona. And then the next package, the person is saying, wait a minute, I want to go after the 1,000 to 10,000 employee company. And this is what they need. This is how I communicate with them. This might be how I do webinars to them. This is how I'm going to do pricing that more fits to their model. Maybe you can't do a three-year contract if you're on the low-end product. So all these things are puts and takes that reflect where's the product, who is the customer you're targeting?

And then how do you want to market and create demand with that audience? Is there a balance or a rule of thumb? I'm sure it must vary by business in what the ideal number of packages are or how many customer segments you should be trying to reach as a startup? Well, I think generally fewer is better because focus is key. Less is more. Yeah, less is more. Like time is always the most valuable currency in an individual's life and a company life.

Right. And so then aligning all that time behind the most important, like putting more wood behind fewer arrows, to me is always much more important. I think generally like two packages, three packages, when you make it too complicated for the customer to figure, it out. That creates friction to the sales cycle. Now, that said, one thing that startups often do is they share their pricing publicly on the site. And the engineer in all of us, like the pragmatic person in all of us, we're like, well, of course we want to share pricing because as customers,

we hate not knowing the price. But as products get much more nuanced and organizations that are buyers and you actually don't know what your pricing discovery looks like, you're better off not sharing your pricing. And one way you know you have a great product is when your salespeople are the one's demanding you remove the pricing because that means that they're telling you you can get more money you can get more money maybe you're a you're a technical CEO who's becoming a product CEO who's becoming a sales CEO if you're listening you're going to be like wait a minute they're telling me we're leaving money on the table it's generally a very strong signal I have a stage question on this though because if you think about the definition of a startup a startup by definition it's a business under a

high condition of uncertainty compared to more established business I wouldn't even peg it to a particular size. And given that, a startup is an experiment. You're running an experiment. And the product, you can run multiple experiments at the same time. We've heard of the famous pivot, you know, the dreaded P word. There's all these different flavors of this. How do you run multiple experiments and also strike a balance with focus and the pricing and packaging strategy? Well, that is the art of running a business. Not a science. Yeah. And like everything is multivariate, but you can generally, if you have smart people paying attention to the numbers, pay attention to the data, collecting the analytics, and giving yourself enough time to clean. And, you know,

that data, like the worst thing for a company to do is make a decision and then like not allow there to be enough time to collect the outcome of that decision and understand the consequences of that decision. And then they make another decision. So the question of like, how do you make decisions and run multiple experiments? I don't think it's that complicated. As long as you're paying attention to like what are the outputs from those decisions that you should be looking for and you should be looking at what's changing across the business. We're living in an era today of running companies where it's much easier to collect and analyze data than it ever has been. You have data lakes where you can bring in product data.

Your CRM can tie into that product data. We've never had that we have BI tools now, that we have open source. Business intelligence tools, right. That's right. We have open source business intelligence tools. We actually run complex analytics and say, wait a minute, my West Coast territory is just doing so much better than my East Coast territory. What is the difference that's pushing there?

Is it because we actually are running more demand gen campaigns on the West Coast and the marketing team on the West Coast is separated? Or is it just that the West Coast sales rupture better? You need to be able to tease apart. You need to be able to tease those things apart. But it's easier to get access to the data and analytics. analyze it quickly and avoid that sort of like analysis paralysis, then I think it ever has been in the past. So, you know, a big part of this. So the big theme I'm hearing from you is a lot of these

things have intentionality, even if you don't know the outcome, and that you can actually control that intentionality by kind of being introspective, understanding your decision making, understanding what works. That sounds great. Now, as a leader of the company, how do you, the CEO, figure out what to work on? And depending on what stage you're at, this whole journey from technical to product to sales to go to market, that's not necessarily perfectly linear. So how do you figure this out? It's not linear at all. I mean, sometimes in retrospect we like to look and think that it was linear.

Of course, right. You know, I think that there's different ways to figure out sort of how do you prioritize your time, where do you spend your mental calories? Mental calories, I love that phrase. Yeah, and that's how I think about my day. It's like, what do I want to, like, you only have so many mental calories. I think of the nutrition density in terms of return on, so I have a phrase that I use for all my editing, which is REO, which is return on energy.

Oh, that's good. I refuse to spend time on something that the output is going to be vastly low proportion outsize win to what the amount of work I put in in terms of energy, creative. So I have a whole framework for thinking about this stuff because I'm ridiculously productive on this front. Well, hopefully this podcast gets published because then I'll know that it had a high ROI. So I think figuring out how you spend your mental calories is really important question to ask.

And sometimes the act of asking that question itself is just like part of the process of figuring out how to spend your time and spend it wisely. and there's different things that happen along different stages. If you're, like, I always just look at, like, what is the problem in the company? Is it that we can't get customers? And then figuring out who that right customer is. But as a company starts to mature, and a lot of these companies get to this, like, two million, three million, an annual recurring revenue.

That's a huge milestone. Very few companies ever get there. But yet, it's tiny when you should be doing 20 million, 30 million. If you aspire to be there, like, you can celebrate the milestone. But it's clearly you have a long way to go to build an enduring iconic company. And so at that point, though, you start to have to start to have a milestone. have a leadership team. One of the biggest things that we see when we give technical founders advice is they need to bring on like a VP of engineering. They need to bring on like a head

of sales and they keep resisting this thing because they're kind of attached to their early startup team. So how did they figure out when to really, there's a lot of religious advice and debates around this actually. Yeah. So I think that there's a bunch of, you know, I always go to the question like, what time is it? Like, what is the priority? Like, are you trying to figure out product market fit or are you focusing on go to market? Like, what time is it? Are you hiring salespeople and ramping up? Are you like figuring out the customers are churning and you better go fix your product? Focus is so important that if you were to ask all your leaders and all the people in your organization, like what is the most important thing for our company right now? They should have

an answer. But one of the, just one of the more tactical conversations that I have with leaders, especially when they're a startup and they have this core founding team and then they're thinking about scaling and they say, well, you know, I have this engineering manager. He or she was with me from the beginning. And I think they're doing a great job managing. One of the things I highlight is bringing in a world-class VP of engineering, like that could rock the boat. It could cause issues, but it's not an indictment of your current engineering manager.

Like, that's not what's happening. Part of bringing on these high-performing leaders and these really well-respected leaders that have a cult-like following with the people that have worked with them and for them before is that they are going to help you accelerate your ability to recruit world-class talent.

And when you deliver that message to that person on your team who's been there from the beginning, it's doing a great job. Like, that should resonate. It's like, oh, wait a minute, yeah, we can get way better to people way faster. like, yeah, let's bring that person on. Again, you have to be very careful about knowing, like,

what are the problems you're trying to solve in the organization? But oftentimes, you know, and I think VCs have a bad rep for this. Is it like they shove in somebody who's way too senior and comes from a way too big of a company? And so you have to think about, like, what is the right team I need for the right time? I think Ben wrote this in his book, actually, which is the mistake that people hire for the future

instead of the hire for the thing they need now. This often comes up with like VPs of sales hires where somebody maybe has run, you know, a 10 or 20 person team, but you're like, well, can they run a 5? 500 person sales team? Well, you don't have a 500 person sales team problem. People often think about the executives they're hiring like, well, is this person going to be with me for four years or five years for six years? I think that's not always the right question to ask. In fact, I had a board member once, Dave Strom, who's like, who's a mentor to me. I think of him was like the Yoda in my life. And he once said an expression that I'd never heard before, horses for courses. So have you ever heard horses? No, I don't even know what that is. Yeah. I think it's like it's sort of an archaic expression. And in race and in horse track racing, you know, there's like dirt courses, there's grass horses. And you want to. And you or run the right horse for the right course. Oh, my God. That's a great phrase.

There's a bad part of this phrase, too, though. There's a bad connotation, which is that sometimes when horses, they run their few races and then they're finished. They run their course. That's where it comes from, that expression. They've run their course. And do you know what happens to horses that have run their course? No, I don't want to know.

Are they turned into gelatin? Something like that. I always used to joke. It wasn't very nice, probably. But I would joke with the VP of sales I had to open ESS. Like, you know, maybe every quarter was his last quarter because he just constantly outperformed. And we always wondered when we hired him.

like, is this guy going to scale? Now, he scaled wonderfully. He's an incredible sales leader. He went from, you know, a 20-person sales team to ultimately a 200 or a 400-person sales team. Then once we got to Cisco, he did wonderfully. But we didn't know when we hired him how far he'd get past 20 people. You got to hire horses for courses. The right team for the right plan. This is a good way of really figuring out, like, is my leadership team adding capacity for me? Are they helping me understand what's happening in the business? Because as a certain point, as a CEO, you're going to start to spend less time on engineering, less time on product. Ideally, you're going to spend more time in the field with customers, with partners, with customer success.

And as you start to spend less time with any individual function, you're going to need to have leaders in place that really are spending all their time, really understanding closer to the metal, what is happening. I love that you said close to the metal, because that's the exact phrase I use when I think of this. It's like bare metal leadership. Totally. Because that's actually the biggest challenge as a product-oriented person or a visionary for whatever the product is in any field, is how do you kind of keep that close to the metal insight,

yet you can't actually be close to the metal if you're scaling? So this actually comes up a lot in startups, this idea that if you are the product visionary, you're the founder of the company, that means you are the product manager for the company, but at the same time, you need to scale an organization. And I think it's important to differentiate the product manager from the product visionary. Oh, great. As the founder and CEO, you can always be the product visionary. But there is going to be a time where you're not going to be able to be able to

spend hours of time with the engineers hearing how they're working on a product or how it's technically going to work. You're not going to spend hours and hours of time looking at all the NPS survey data or the customer support tickets that are coming in. And so like oftentimes I'll meet these startups with like, oh, I can't hire a product manager. I am the product manager. That's a common thing for technical. Totally common. And it feels like it's your baby. You don't want to let it go. You're only going to have five seconds a day to think about different decisions you make. And so if your engineering team and the rest of your organization is constantly coming to you, you're going to end up getting paralyzed.

The worst thing for a product visionary is to make some decisions that then they know were the wrong decisions because they lack data or they lack the time to be thoughtful about it. And then they start to undermine their own thinking about whether or not they even are a product visionary when the reality is just hire a product manager. You're not offloading the product vision to that person, but you're offloading is the day-to-day ground war of figuring out what is customer support telling me, what is sales telling me, what is engineering telling me, what are customers telling me, synthesizing, analyzing, prioritizing, sorting that data, and obviously as the founder and visionary, you have ultimate say, but you're going to be armed with so much more insight information that your intuition, which plays a big role too, is just going to be that further enhanced. As a visionary, you're going to have some special secret, some earned power that you have over the lifetime of your experience, where you're the domain expert in a problem set.

You're going to know more about it. You've literally lived and breathed this thing. You built the company. You started it because you literally have it seeping out of your pores. That's right. we had a recent podcast at Safi Bacall, and he described how Steve Job had both the artists and the soldiers. And so not only did he have himself,

but he had like Tim Cook and Johnny Ive. But also, when you think about the story of the iPhone, the app store was actually a result of his team coming up with the point that, hey, you can't just have Apple apps on this. That's exactly right. If you want people to use this. And so people and your product managers will come to you, and they'll, when they have conviction on something

and they have the data and they have the view, you'll then be able to make those bets. Yep. And nobody would say that he wasn't a product visionary just because he didn't come up at the app store. On that note, just a probe on one bit, because I've always wondered about this. There is a tension between this idea. Like, I hate this idea of the head and the hand.

You can't have one person be the head and the other person be the hand. How do you reconcile that bit? Like, how do you call? I guess what I'm asking is how do you calibrate along this line of visionary to manager? So I think you want to know what you're hiring for. Because there are product managers that are much more analytical, and there are product managers much more visionary. And you might need different kinds of people at different kinds of times.

So I think you have to be sort of self-aware and be really intellectually honest. Because if you actually need someone who is more visionary, then you're going to have to deal with the fact that you're going to be going to battle and sitting in a room and duking it out over ideas. It leads to a secondary insight, which is that if you're a CEO of a company and you do not trust that the information you're getting from one of your leaders is what's actually happening on the ground,

that's a tremendous problem. That's a huge red flag, fire, and move on. Or it could be you if you're just not a trusting person. I think you have to work to resolve these things. Like, you don't just cut and move on immediately. But you either have to work to understand what's actually, like, do they understand what's happening? and are they able to communicate it to you and the rest of your leadership team?

I always like to think of leadership teams. It's not just this like, oh, the head of sales reports to the CEO, the head of marketing reports to the CEO, and you have these like siloed, you know, sort of pairwise conversations. The leadership team needs to be working together as a team and communicating with each other because as a CEO, you don't want to be interjecting and intervening in every conversation, every decision. And so you want to start to figure out, like, are they collaborating, are they sharing each other's experiences?

Do they understand what's happening, each other's businesses? are they meeting on their own? I think as a CEO, you actually want your leadership team to meet independent of the CEO. That's actually really interesting and counterintuitive. Yeah, I think it's really important. And I think it does happen in a lot of high performing teams very commonly, maybe not explicitly, but it happens. And then obviously, I think in some places you can do it explicitly when it's done a productive and positive way, not because the CEO's a distraction, right? But ideally the CEO is out doing something that's of high value to the company. But if you get to this place where you do not have confidence that you are

getting the best information from your leaders, if you don't resolve that, then you have, then you have to find someone who's a better fit. Whenever I hear, when I talk to a CEO who's having a tough time in the company, and they're telling me about what's happening, I'm like, well, like, just tell me, like, do you really believe that that is what's happening? And you either have to go deep. And as a CEO, you do get these occasional bullets where you can cause a little bit of, like, organizational stress to, like, go three levels deep and really figure it out. And if you find out what's happening is not what you are being told, you've got to make a change in leadership. By the way, I should just say that,

all my lessons about leadership management, I pretty much learned the hard way. So I'm just trying to help save other people from making the same mistakes I made. Yeah. Well, speaking of that, let's talk about your story. So you're the founder of a company called Open DNS. First of all, what is Open DNS? So Open DNS is a cybersecurity service that delivers a faster and safer internet. And we really innovated on a 25-year-old technology that used to be a cost center that

nobody wanted to innovate on. We actually prove that you can actually build a business on top of this thing that used to be free if you make it better. So speed was one part. But then the other part was security. Let's say you type in Amazon.com, you're meaning to go to Amazon.com. That could be a fishing site trying to steal your credentials. So we would say, hey, wait a minute.

We know that from our tens of millions of users, what you really meant to type in was Amazon.com. So we're going to show you a page that says, hey, you typed in Amazon.com. We think it's a fraudulent site. Did you really mean to go to Amazon.com? That may help protect you from getting fished. It was the first third-party dance provider. In fact, when we started the company, some of the gray beards of the Internet, who I respected tremendously, they told me, A, what I wanted to do was impossible, and B, even if it was possible, nobody would want it because they just would get it from their ISP.

Oh my God. This reminds me of Mark with Netscape. One of my favorite stories is I saw these old forums that he was on when he was proposing like more of a graphical user interface. Like the image tag. Exactly. And the thing that I thought was so funny is the people who are the established kind of old fogies, for lack of a better phrase, they don't like the change ironically, even though they were very revolutionary at the time. So you mentioned a 25-year-old technology. Why was that almost impossible to them? So think of the DNS as like a phone book, except that what we wanted to do was not just give the same phone book to everyone, but we wanted to give a custom phone book to every person which meant, let's say you typed in Playboy.com.

Well, for some user over here, they may not want content filtering, so they want the answer for Playboy.com, but maybe for someone who has small kids at home, they want a different answer. And doing this at very high speed was thought to be impossible. That's fantastic.

But it turned out that it was possible, and we could do it faster than even if you had no preferences in settings. I have to ask you, how old were you when you had the insight that you wanted to build open DNS? So I had started a DNS company in college that did a different kind of DNS. And through that, I had gotten super interested in cybersecurity.

And so I met an investor when I moved out to California who had asked me basically why I wasn't doing more with my original company. Then he and I ultimately came up with the idea for opening us. That original business model that I worked on with him was an advertising and supported business model. We pivoted the business and then in 2009 and having the people that used our service be the people that pay us for our service was such a much better alignment of interest. And so that journey took a long time. And by the time we pivoted the business, it really was a different business than when we started in. Then when we sold it in 2015 to Cisco was really a full-blown cybersecurity company. Why did Cisco want it?

So I think if you looked at what happened in between, let's say, 2007 and 2015, the iPhone came out. You had more and more people working from coffee shops that all had Wi-Fi. You had workers working from the road, people using mobile devices. So installing like Norton Antivirus or McAfee Antivirus on your desktop was no longer sufficient security. Right. And so our service, opening S, was delivered, was cybersecurity delivered as a service. And it happened just intrinsically as a part of your internet connection. Yes. So you didn't have to have special software. You didn't have to install an appliance or a piece of hardware. And so as people were working differently and the networks were becoming more ephemeral, Cisco, which is a major

cybersecurity company, such as the largest cybersecurity company, wants to evolve to match that shifting IT landscape. You mentioned the pivot a few times. Tell me about that because that's such overused, one of those platitudey words, like big P, little P, whatever. And I know you mean it and actually what happened, but give me a little bit more texture around the pivot. What was that like? The best time I never want to have again. I mean, look, this might be its podcast onto its own because there was an 11-month period where I wasn't even CEO of the company. My original investor had fired me. Oh, my God. I was CTO. I didn't know that. I'd been demoted. CTO is awesome, though. I think CTO is the most powerful person in the company. Not when you want

to be CEO. I guess that's true. We pivoted the business 2009. What we thought was a consumer business actually turned out to just be a free business. One day, we actually got a call from a major oil and gas company that had been using us. And we knew they were using us globally, like on oil rigs at their headquarters and all their distributed offices. And so then they finally, we got an email like, look, we need to have a support contract like as a matter of our, just like corporate hygiene. So like figure it out and like give us a quote, we need to like have a way to call you

if there's a problem. And so we went and got one of these like virtual phone numbers on the internet that would like route to like an engineer's phone number. And if that person didn't pick up, it would route to like the next engineer's phone number. If that person didn't pick up, it would route to my phone. Oh, my God. So you were like the support desk? Yeah, it was like a tiered call system.

And went to like three people and we sent them a quote for $100 grand and they signed it immediately and returned it. And they now went from like us making $2 a year in advertising, which we hated to paying us $100 grand for something we're already doing. And we get to turn off the ads. You don't need to be a rocket science to figure out like, wait a minute. Maybe there's something here. And we had two or three other companies that had asked previously for something like that. So we went and sent them quotes. And they all signed them and returned them.

Yeah. Why do you think you didn't know that this would be the business model up front? Like, why did you have to pivot? Honestly, not to sound judgmental at all. It seems obvious to me when you say it in hindsight. Totally. So I'm confused at why you didn't see that coming up. I think we were sort of enamored with this idea of keeping the whole internet safer. And that meant going after individuals.

Idealistic. We had partnerships with neck gear and D-Link and these people that sold consumer routers. And so we sort of ignored the opportunity that's right in front of our face. Yeah. But as soon as you realize, like, you're not going to be able to raise money. and you actually have to build a business, you start to, like, open your eyes a little bit. And so we did that. And then I hired Michelle Law, who actually spent seven years at Greylock to run BD for us.

And ultimately, she became my CEO, a wonderful person and a good friend. And she basically had seen enterprise companies many times. And so she realized as we wanted to go enterprise that a bunch of the team had to change. First of all, half the team just, like, didn't care about building an enterprise software company. So they just quit. Then, like, the other half of the team just, like, could not internally. realize that we can't just, like, change the UI overnight because it turns out some of our big customers had their own manuals that they had built with screenshots of our product.

We got a nasty email once from this major oil and gas company. They said, like, we have all this training material on screenshots and videos we made, and you just totally changed your whole dashboard. Like, you can't do that. And you just have to learn how to manage those things. And, like, then you do feature flags, which are things that are, like, common today. But in 2009, like, feature flagging things. What's feature flagging?

Feature flagging means that, like, some subset of cohort of customers gets the access to a new feature or a new look and feel. A lot of times people use it for A, B, testing to see if something works. But you can also use it just to, like, keep certain customers on certain packages or on older features or older looks and feel. So it's not like, you still have one code base, but people have slightly different experiences. And so we were started to do those things. Like we started implementing feature flags and things of that nature.

But it meant that over the course of about 12 to 18 months, of the 30 people before the pivot, I think only three were left at the end. When did you go from CEO to CTO? So right before all that happened. from most to 2008. And then the only good thing that ever came out of the total global

recession and economic collapse was that my early investor needed cash. And so we found two investors and that's actually when I first met Mark and Ben. We found two investors to come in and buy out

my early investor. Those investors came in and started to rebuild the company. But the biggest thing that's fascinating to me is you came back as a CEO. So what changed that you didn't make this?

I mean, because you're the same person. You didn't change overnight. Right. Like how did you pull that off. Yeah. Coming back as CEO the second time, after spending almost a year as CTO, one of the things I saw when I wasn't CEO was all these things that weren't happening in the company that sort of been happening. And of course, I blamed the current CEO, but the reality

was I actually was not doing them either when I was CEO. Sometimes you just have to have this like outside the glass box kind of view. And you're like, wait a minute, people don't know what's important. Wait a minute. We're not making it clear what the priorities are. Wait a minute. We're not firing these low performing people. But I wasn't doing any of those things, either. And so that to me was very eye-opening. So when I came back as CEO, I think I was a much better listener. I think I had this belief maybe the first time I was CEO that I'm expected to have all the answers. It's just not possible. What is important is CEOs have to make decisions. And I think they have to be able to articulate their decisions. But they don't have to

have to be the smartest person. That's a really important point. There's actually a big difference between an answer and a decision. Totally. That's actually something really to reflect on because I think most people conflate those two things. Totally. And in fact, it turns out actually the opposite is true about having the answers. In fact, I often tell CEOs, because even before I joined Andrews and Horowitz, people call me for advice. And that's one of the things I really enjoy. That's why you're VC now.

Yeah, it's why I'm a VC. That's one of the best parts about the job is like, I like being the first phone call for a CEO when they've had a tough moment or they need help. One of the things I often tell CEOs is like, you know, actually, like when you think about the table of leaders around you, like, there's actually room around the table for one person who has no idea what they're doing, and that's you, a CEO. If you have the right leadership team, they're adding intelligence for you. You know, I had sort of gone from technical CEO to product CEO to sales CEO, but my fault as a sales CEO was that I loved the dog and pony show.

I loved the pitch. I hated the clothes. Why is that? That's fascinating. You know, I thought, you know, you could say that it was ego or ignorance or naivete. Like, I didn't like asking for the purchase order because, first of all, I always thought our pricing was low. So if the customer, and customers often like to negotiate. Oh, you're like ready to fight.

Like, fuck you. I want you to pay more. Yeah. So the customer goes, oh, $100,000. I think it should be $70. I'm like, fuck you. should be $140,000. Like, I'm raising the bread.

You're the wrong guy to bring it at the clothes, basically. Yeah, my sales would be like, yeah, so you can't negotiate with this customer because like you're going to just blow up this deal. But also, I didn't like the uncomfortable. And I'm in a much different place now, obviously. But like at that time and where I was as a CEO, I hated the negotiation. I got uncomfortable. Everyone, they taught me so much because there was only room around the table for me to not

really know all the answers. I will often say that my CMO at OpenDNS, Jeff Samuels, I think of them not just as my CMO, but as a mentor to me. I mean, he taught me so much. And actually, I would say that about my VP of engineering, my head of sales, I could take the inputs and use all that to make a decision. And I felt very good about those decisions I made. I think CEOs find it a huge relief when you tell them, you're allowed to not know. In fact, you kind of, if you have the best people, you're going to know the least. It is not uncommon for a CEO or a leader, a manager. This is just a good general life advice. It's like, you know, you don't want to be like the whiny person constantly, like, harping on

something. But what I would say is, like, you do sometimes need to present an idea more than once. My old head of finance, who ultimately became my best friend, used to always joke with me that, like, he would just tell me everything he said twice because he knew the first time I'd ignore him. I think I have the same problem. Yeah, like, he would tell me, like, some statistic about what's happening with marketing spend or with hiring or sales plans. And I'd be like, oh, that's not really a problem, like, whatever. Like, I don't care. Like, you're just like a crazy finance, like, bean counter. Yeah, yeah, yeah. But then, like, he'd come back, like, a week later and be like, hey, I have more data.

Like, I did further analysis. Like, you ignored me, but like, I know I'm right here. And then I'd be like, oh, you're right. Why didn't you tell me this last week? So in that case, the CEO can get answers from all their management team and then make a decision based on all the answers you're hearing. That's right. And I do think sometimes you do have to tell people more than once. And that's just a function of how human beings operate.

So speaking of this telling people more than once and learning to listen, that was your big shift between when you came back to be CEO. And you kind of learned your lesson, so to speak. I honestly feel like that's kind of a trite thing people say all the time. Like, listen, better. I hate the design thinking mindset around empathy for the, and this scenario and this persona. And it's just so, I can't diagnose what's off. I think when you're building a company, being empathetic, it really means understanding. It doesn't mean accommodating.

There were situations all the time. And this happens all the time as a leader. We're like, you may not resolve that thing. You can still understand it and be empathetic. Like, I can be like, yeah, that is terrible. Like, I understand what you're saying. I'm hearing you. Honestly, that's half the best.

on relationships. You don't need an answer 99%. You just someone to say, fuck, I feel for you. That sucks. And you're already feeling like 80% better. That's right. That's right. When I think about empathy, you really want to be a great listener. And so actually a friend of mine, Wendy McNaughton, she does this whole like New York Times thing every other week where she really goes deep onto a topic. She's written these books. I think she thinks of herself as an artist. I think it was an artist and an entrepreneur. One of the things that she taught me about a year or a year or two ago was, like, when she's trying to teach people, like, how to sort of be a really, really solid listener, is it when someone's talking to you, you're like, tell me more

about that. That's just the phrase. Tell me more about that. So just make that your first question. When you talk to a customer, oh, what's going on? Oh, we're doing like annual planning, budget plans. Tell me more about that. Like, how are you thinking about that?

What is happening? What's the frustrating part about annual planning? Tell me more about that. So what's interesting to me about that is, to me, this is the difference between a focus group and an ethnographer, focus groups and surveys are asking questions for things you already know to ask. That's right. And an ethnographer is embedded in an organization or is sitting and is essentially just listening

to learn and observe and letting those patterns reveal things. The deeper insights come out. Exactly. When you go down there, like, tell me more about that path. Exactly. That's when you get these, like, flashes in your brain of like, wait, now I really understand what's happening. It's not that annual planning sucks.

It's that you're having budget issues that aren't being resolved in a way that you need or that maybe your tools you're using to do annual planning or your way. you communicate and collaborate with your team or the way you work cross-functionally is not working. Totally. Totally. I consider myself an ethnographer-esque editor because I want the context to know what I'm not hearing to really understand. So it's interesting because on the ethnographer side, I don't think people know this about you, but you started off your career or academic career because you actually started working when you were like what? Eighth grade? What is that? Like 14 or 15? And that's when you got your first W2, right?

Yeah. I've had a 1099 or a W2 every year since eighth grade. I worked at a mom and pop ISP in San Diego and I learned all about routing and networking. I went to Washington University in St. Louis. I applied to the School of Arts and Sciences. When I went there to interview, they actually then had me interview with somebody in the School of Engineering and the Computer Science Department. By the end of first semester of freshman year, I'd switch back to the School of Arts and Sciences. And the reason I switched was I took a class of introduction to human evolution. And I just found it so fascinating. Like, I've always learned in my life. I do best of the things I really enjoyed working on. Like, I have trouble doing things I don't want to do.

Me too. I'm the exact same way. Yeah, it sounds obvious. But like some people, can actually just like will their way through. No, I can't. I can't. I have no energy. I have zero. Talk about return on energy. I have like no energy. I have like no energy to me. Yeah. I'm just like, also like I'll be okay if I just don't do this. Yeah. So I felt like I had trouble in school with things I really didn't enjoy. So I learned how I just, every book I read I thought was so interesting. I learned about like how women and, you know, enforce power hierarchy in South America in a way that we don't have elsewhere in the world. I learned about like what happens in Southeast Asia around farming. I learned about the green revolution in Africa. But then I find that like in my life, I actually think about these things. all the time. That was back to me my next question. Do you think it actually is useful in your career as a technologist? Absolutely. I think about demographic transitions. I think about when I read about what's happening in Japan. It makes me think about how's that going to change my investing thesis. And I think it comes up constantly. It comes up both tactically as you think about yourself in like leadership and organizational dynamics. It gives you an appreciation that there's many perspectives in the world. In fact, it gives you an appreciation that more perspectives

are more better. And you want more. So that is then a perfect way to close this episode. So David Yulevich, he's made a journey from anthropologist to technical CEO, to product CEO, to sales CEO, to go-to-market CEO. And now investor. Welcome to the A6NC podcast. Thanks. Glad to be here.