The a16z Show - When Business is Battle: Inside the Boardrooms of the CEOs that Survived the Storm

Episode Date: November 23, 2023

Taking a company from idea to household name is always difficult. But the past few years presented challenges that caught even the most-seasoned CEOs off guard.In this episode, you’ll hear from two CEOs that navigated these waters and somehow, came out on the other side. These recordings come straight from our exclusive Connect/Enterprise event, bringing together top executives across the a16z network. Resources:Additional content from Connect/Enteprise:Enterprise Startups: Advice on Hiring, Firing, Scaling, and SellingBuilding Products With Generative AI Learn more about company-building: https://a16z.com/category/company-building/ Stay Updated: Find a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that 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. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that 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. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

So I got good news and I got bad news for y'all. So the good news is that you all have a shot to be successful, to grow, to exceed expectations, to create a world beating company and totally kick us. That's the good news. Bad news is I'm not sure it gets any easier. What kind of employees you hire, even when everything works well, is really, really critical because you will have a crisis. They didn't know how to help.

I wasn't sharing enough information. I wasn't giving them the context they needed to help pull us out of it. And I think that was probably the most important, actually, step that we took, to actually stay in the market, not leave the market. We got to go faster. We just ran down the runway and jumped over a one-foot bar. We got to jump over the five-foot bar. He's the only CEO that I've worked with who screwed up his company almost as much as I screwed up mine. I think a lot of other people were way too much trying to keep everyone happy.

Taking a company from idea to household name is always difficult. But the past few years presented challenges that caught even the most season CEOs off guard. And we're not talking about challenges like a pixel breaking or a key customer turning. We're talking about when shit really hits the fan. Times like when a virus decimates your revenue going from $100 million to zero. After a year of growing a workforce from 200 to 12. hundred employees. Or, as Ben likes to say, being a post-revenue CEO. In this episode, you'll hear from two CEOs that navigated these waters and somehow came out

on the other side. Plus, these recordings come straight from our exclusive Connect Enterprise event, bringing together top executives across the A16C network. First up is Navon co-founder and CEO, Ariel Cohen, in conversation with A16C co-founder, Ben Hux. Horowitz. You'll hear how Ariel bounce back from perhaps the worst curveball the world could throw at a travel company, plus how he thought about hiring the right type of employees during a crisis, and how Navon ultimately bounced back, especially into a platform shift that threatened its entire core business. As a reminder, 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. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16C.com slash disclosures. I always like talking to Ariel because he's the only CEO that I've worked with who screwed up his company almost as much as I screwed up mine. A lot of you may have been like pre-revenue CEOs. we were both post-revenue CEOs as we lost all of our revenue.

And so let's talk about that. So, Ariel, maybe take us on your journey from starting the company pre-revenue, revenue, post-revenue, and what the hell happened? Yeah, COVID happened. But, yeah, first of all, I'm happy to be here. Thank you for listening to us, I think it will be interesting. So we started in O'15, and sleep actions as kind of with a very simple idea. We saw that nothing makes sense around the T&E.

around travel and expense. Both Ilan, my co-founder and I used to work in different organizations. And when we needed to travel, you send an email, you call somebody, it's back and forth. And then if you need to change something is a nightmare. And expensing, it's like you print out a receipt and then you walk it back and you need to make it digital again. So we thought it doesn't make any sense. And we thought that there is an opportunity to create something that would be super easy

to book, super easy to get support, super easy to expense. And then the company is getting everything that they did. need policy and compliance and safety and saving money and all of these things. So that was kind of the journey. We picked up really quickly. I was kind of talking with CFOs trying to sell the idea to them. We didn't have a product. And every CEO kind of mainly startups that I've met was telling me, okay, yeah, I want to use it. So then we really needed to accelerate the product development, launched in 016, grew extremely fast, kind of like on the 500, 600 percentage every year, even kind of with big numbers, got to around $100 million run rate. And COVID happened.

And really, as Ben was saying, it took us two days to lose our entire revenue. Yeah. So 100 million in revenue, but your expense line was even higher. Exactly. And then all of a sudden you had no revenue. So like, once you processed that no money was going to be coming in for, you didn't know how long. How did you feel? And then what did you do? Take us through like the emotional journey and then how you landed on, okay, I got to do this. So we had this crazy idea that we should buy one of our biggest competitors that was in February 2020. Actually, it was several months of negotiations. So it started a little bit earlier. But it was really, really, really big deal. To finance it, it would be.

actually crazy execution even in 019. But we were kind of getting the deal in order. And late February, I flew out to Seattle. This is where these companies, to kind of almost closing the deal. Like me and my CFO was lying out. And I'm landing in Seattle and I'm getting a text that this was the day that the two first cases of COVID in the US was discovered in Seattle. So of course, they canceled the meeting. I'm kind of turning around in the airport, flying back to SFO. And I remember in the airplane, I was texting you. And at that point, we had a plan to go another kind of, I think it was 4X in 2020. And I told you, hey, I think we need a completely different plan.

I still didn't feel anything at that point. I was kind of mainly. Yeah, suspended. You're like, Wiley Coyote rang off the cliff and then you're suspended in the air. I started to get depressed, actually, in April, May. It took me like a month. Like in March it was just execution, right? We needed to, obviously, everybody went to.

go and work from home, all of you. But we had a pretty big call center. These are travel agents that sits in a location and there is a lot of requirements around PCI and other things. So it's not that easy to take all of these people to walk from home. So we needed actually while we are losing our revenue, we needed to invest a lot of money to actually go and put this call center in place. Somebody told us that all of the flights to the U.S. will get canceled. So we needed to have like a plan of like in two days bring all of our customers back. So while we're, we are kind of collapsing, we kept investing money of trying to kind of do the right thing. Yeah, right. Customer satisfaction. Customer satisfaction and just even do the right thing.

People are stuck everywhere. So March was execution. We did pretty massive layoffs, got a lot of negative press around it, needed to manage that, needed to manage kind of employees' morale. Right. I remember you got attacked because you did a layoff over Zoom during COVID, when like they would have attacked you for bringing you. bringing people together. So, like, it was... We were the first ones, so I think that was the issue.

We were, like, acting really fast and did Le Offs over Zoom. And it's a really good headline. And probably, if I thought about it, I would have waited for others to be the first ones, but I didn't. So it was a lot of execution without a lot of thinking.

And then in April, I think I started to think about it. And actually, I know there are a lot of founders here. I think it's a roller coaster anyway. And we had a lot of other crises in the company. I know that now probably, you know, in enterprise, it's actually really, really hard to sell. So there's always this thing. There's always this kind of roller coaster. And I think York, maybe mood, psychic as a founder, is actually really, really critical.

And pretty much through June, I was pretty much in depression. You and I talked a lot about it. And something in June kind of late June changed and I started to manage the company. So it took me like three months or four months to get there. But it's important. It's important because at that point, people were not traveling, but everything started to look kind of good. Yeah. So one of the things, because you're growing 500% a year and you were going to grow another 400% in 2020.

It didn't happen. That's kind of funny in retrospect. But when things stopped and you looked at the company, how much of your mind was like, well, look, we were in a race against time, the market was there. we were spending the money like we had to, and nobody could have anticipated COVID. And how much was in your mind like, I could have spent half the fucking money and I would have been fine?

Like, what the hell was I doing? I wasn't getting anything out of all these people I was hiring. I was just destroying my own culture. And I only asked that because I had those thoughts in my mind when I was in the same situation. So we grew in 019 from 200 employees to 1,200 in a year. Yeah. So you can imagine

the mess that we had in the company, but what makes it even worth, we're kind of the right company to join, like going really fast, the right investors, we're having you in the board, all of the right headlines in the press. So think about Silicon Valley, really, really, really easy to hire employees. But not all of them, but some of these employees would be employees that will join that line. Actually, they are joining, you're almost signing an agreement with them, hey, you know, I'm going to have an exit, you're going to be able to put in your LinkedIn that you worked at this company.

And it's really different from the early employees that you can do a lot of ups and downs and they don't really care. So I think that was the hardest thing. I think the hardest thing was to actually manage these employees through that type of change. And the reality is that a lot of them have left. So I think what kind of employees you hire,

even when everything works well, It's really, really critical because you will have a crisis. And I said, I think we had like three crises in the Navar, not in the same level of COVID, but three levels, three crises, and the employees around you will actually will define. It will make the difference if you're going to survive it or not. So in retrospect, because, like, we all deal with this.

There's employees, and God bless them, that you get and are on your mission, believe in the company, want to make it something, really are trying to do something, kind of beyond themselves. And then there are, particularly in Silicon Valley, there are many employees who are like, well, what's the best deal for me right now? And if this deal isn't good, then I'm going to move on. And we all hire probably more of the latter than we'd like, oh, look at the day. They went to Stanford and it's a PhD and AI and this and that, blah, blah, blah, and all the reasons that your managers tell you they have to hire them. Do those employees, the latter,

have actual value? Like if you could do it again, would you hire? Any of them? Would you hire some of them? How do you think about that? I will hire some of them for sure. Some of them are still in the company. Actually, I would say that if I'm kind of looking at this kind of employees cohorts.

We have the employees that started the company, and a lot of them are still there, and that's like employees that are there for eight years. And the next cohort are actually employees that joined us during COVID, because they can probably, it's the same thing as your initial team. It's like they can get any type of shit. And then you have people to join us in 018, 019, that some of them are still in the company, and these employees are really good. So if they stayed and they stayed where all of their friends were telling them,

what the fuck are you doing? Like nobody will ever travel again. That shows a lot of resiliency. And these are good employees. And it took me very, very long time to figure it out. But I think we have now in a van this formula that basically says, we are hiring employees based on four criteria. The first one is drive.

It's not any drive. It's what exactly. Let's understand what drives them. The second one is the smartness. Are they smart or not? The third one is qualification. And the fourth one is actually character. And this is very hard to define, right? How do you define it? How do you figure it out in an interview? I think, you know, once you are, I'm actually writing it in the beginning of the interview. And that's the only thing that I'm actually trying to understand. And I'm kind of putting like plus, minus, I don't know. kind of, and until I'm figuring it out with this question, that question, the other question, I'm actually not leaving that person, and if I didn't, I would not hire that person.

And what is, when you say character, like, how do you define it? It's funny. You deal with engineers, right? So, of course, I've explained it in Hollands, and of course, the entire engineering team was asking because that's not like, this is what you do. This is not well defined. And what I was telling them would you go and have beer with this person, right? So you want to actually spend some time.

But there is another way to think about it. I have this thing, and I think probably a lot of you have it. You sit with somebody, and is it kind of painful in your gut? Like, it's kind of, it could be a one-on-one with one of your execs. And it's really, no, I don't want to be there. Like, it's painful. And by the way, that's when I know that I need to fire. But that's when I realize that actually you can also do it when hiring.

Yeah, that's actually a really good point. Even if it's you, not them, if you don't like talking to any of the people on your team, they're never going to be effective and you're never going to be effective with them. And that's an important realization. A lot of people kind of try and gloss through that. So kind of getting back to the crisis, sorry to retramatize you, but most companies have that. We call them Wiffios, we're fucked it's over,

kind of moments where you're in bad trouble. And so if you kind of characterize yourself during your kind of depression period and when you came out of it, one of the things that a lot of CEOs do is they feel like, oh, my God, I feel like I'm going to die. I can't let the company think it's going to die. And they get, I would say,

polyanish, optimistic outside and then completely depressed inside as opposed to just being, like, realistic. This is what it is. We have, like, a narrow, like, window to get through this thing. If you want in, stay in. If you want to leave, go ahead. Like, how would you characterize kind of,

kind of how you went through that cycle and how it made you feel? I think there was a different layer, which was not the business layer, because the business layer was easy. Basically, I came to my staff and then to other employees, and I was telling them something very simple. Do you believe that people will... Travel? Yeah.

And if the answer is no, the answer is obvious. And by the way, there was like a whole contingent of people, a lot of VCs, who were basically saying travel is never going to happen again. Yeah, we raised money as strange as it may sound in May 2020. So that's after COVID started. Yeah. And I think I've talked with more than 20 investors, which I've never talked with so many investors in my life.

And I think 18 out of the 20 were basically very, very clear. The travel is not coming back. And not coming back. I'm not talking about 70%, 80% and not coming back at all. But that was kind of, we'd open Twitter back then, and that's what the Twitter will tell you. But that was the layer. There was another layer, which was not the best.

business layer or the company there, it was everything that was going around, like COVID, and in June there was Black Life Matters and all of everything. And we actually, we have a really big call center, which means that we have people all over the U.S. So I also had this kind of cultural war inside the company while I'm actually trying to figure out how to manage that thing. So that added another very, I would say, complex layer to the thing. And this is why I'm always mentioning June because by the end of June, I was like, fuck it. Either you are here or not and do whatever you want to, but this is what we're going to do and this is how we're going to get out of it. Yeah. And one of the kind of interesting, counterintuitive things that you did, because you

have the travel product, which you kind of built the company on and got it to 100 million and then zero revenue on. And then during COVID, before you got travel back, you started building an expense product. So to expand the product line when you had no revenue and a limited amount of cash and everything else going on. Like, why did you do that? And then how did it work out? It's funny. I think you talk about all of these things now and everything makes sense because, you know, our expense and payment business is really big right now and it's going like it's more than doubling every year and with pretty big numbers. So it's kind of now everything makes sense and, you know, maybe I look like, you know. Yeah, because I think most people,

here probably are getting the exact opposite advice during kind of this period that we're in where revenues are down and so forth. The last thing you should do is start a new bloody product line. I think it goes to intuition, gut-filled, but also mission. I think that, again, if you believe that travel will come back, but nobody needs it right now, you need to ask yourself, so what people need in the kind of area of what you're doing. And obviously expense management and payments, it's an integral part of it, and we always wanted to do that. So yeah, the counterintuitive,

will I accelerate it right now when I'm basically trying to save money? But back then, I didn't think about it like this. Back then I was like, it was almost an obvious move. And another obvious move that was very expensive, that was even a bigger bet, was to continue to sell. We kept ourselves in marketing teams, and we told them go to customers right now

and tell them, hey, we'll, sell you now, it's free anyway, but implement it. And when travel will come back, you just did change management without any price. And our biggest customers, our entire enterprise segment, we didn't have enterprise pre-COVID. Our entire enterprise segment was created like that. So companies like Netflix and Adobe and Unilever, which would not think to do change management to a company like us because we're just not mature enough. For them that, yeah, we have nothing else to do anyway, you know, there is a haven't team, right? So maybe we can implement in a van. And I think that was probably the most important, actually, step that we took to actually

stay in the market, not live the market, and then develop other things. Yeah, related to that, we look back on it now and it's like, one of the things that was weird about COVID is when it started, as you said, it was like, oh, are we going to have to like shut down for two weeks? And then it got longer and longer and longer. How did you kind of know to come out of COVID when it was ending because like there's still, I think lately the New York Times has been writing COVID still going. Go home. Get some more shots, all that kind of thing. So how did you, as CEO, how did you go, okay, the pandemic's still here, but it's going to change for our customers and it's going to change for us? So I almost like at the beginning of COVID

because it impacted my life and my company and everybody's life is so much. I kind of almost became a COVID geek. I read every article about pandemics, everything. And it's very consistent. It's always two years. And it's not if you have a vaccine or not, or if it will vanish or not. It was obvious that it will also stay. But it's kind of people are adapting to this and there is more of immunity and so on. So it was very, very obvious. And I remember when the discussions where you could see me like with interviews in the press in April 2020 saying that it's two years. Like I was saying it's two years and I know that a lot of people are saying maybe it's two weeks, three weeks, two months. And when you kind of say it's two years, then you know what your cash situation is and a lot of other things.

It's funny because it took a year for the vaccine and for COVID to kind of decline. But the thing was we already started to scale back up, like call centers, hiring employees. And suddenly the Delta variant came. We're way more resilient at that point. At that point, we were like, okay, we'll figure it out. But we raised money again. And that was on an app round. So I think we also learned how to manage ourselves.

And even if there are waves and stuff, how to manage our money, how to raise money, how to tell the story. We got better at this. We just realized that, okay, we're managing the company while there are COVID waves. Right, right. So switching gears a little bit. One of the things that I remember you doing is you had your CTO built a whole like machine learning. model, built its own COVID model, like how the spread would go and all that. It was accurate, might be it. Yeah, yeah. Well, it was accurate eventually.

Like all the COVID models, it was wrong until it was right. I love how modeling has become science now. It's like anybody with a model as a scientist. But one of the kind of big things that is kind of coming at your business to maybe like help it or destroy it is generative AI. and that when you talk to kind of futurist and so forth about like, okay, what's going to happen with generative AI? One of the first things is, well, the user interfaces that we have now, we call them the Wimp, Windows, icons, menus, that kind of thing, is going to go away and we're going to go to a natural language interface.

And the first example, everybody uses is travel. Right. It's like, well, like, why am I pulling down menus and trying to pick an airline and stop, nonstop, and stop in first class? and business and this and that. Can I just say I want to go to Paris and like, you know me, can you put me on the right plane and the right flight and the right way? So how do you think about that with Navon, which has got a big, gigantic user interface and all kinds of code behind that and all kinds of experience behind that? Like, how are you looking at AI for travel? I guess what's

the future of travel look like? And then how are you going about getting there first? First of all, I think that people are right. I think travel is an amazing, amazing, amazing use case for generated AI. But there is a reason for that. So even when we started Navan, we did ask the question, but why people are calling an agent. Yeah. Even back then. And people are calling an agent because the agent knows them.

And the agent actually trims down the possibilities. The agent is basically telling you, you know, when you go to Paris, there's actually thrill tales. Not like 3,000, but 3 hotels. And choose out of these thrill tales. And that's why frequent travelers actually like agents, and they don't like OTAs or online, but just they're going to call. So we knew it from the beginning. And even in the beginning, we used machine learning to prioritize the search results.

So you'd be able to basically whatever you see in the first three results would be that thing that you're going to select. So we knew that machine learning would be the solution to that agent kind of issue. Obviously, generative AI is kind of leapfogging and allowing you to do something else, which is a discussion, but then with the data that we have, because we have frequent users, right? With the data that we have, we can create a match. So I don't need to do like this prompt. I'm Ariel, I'm the CEO of Navan, right? We know that. We can push it. And that thing can tell me when you go to Paris, you are likely to want that thing. So let me book

it for you. So we went, we generated AI on kind of three steps. The first one, we took, We have a bot, Ava, that was always kind of doing part of our support. And we took her and we kind of connected her at the beginning. Her, the AI. Yeah, exactly. Yeah, I'm kind of personalizing her. But yeah, but two open AI later to other models to mainly save support time. That was an obvious move and a really, really fast move.

Then we did the same with analytics. Basically, how can I save company money and kind of show me how can I do that? And again, very, very obvious steps. We're going to release in two weeks. something that will do that thing that I talked about. Basically, that match, and basically, I'm flying to Paris. Can you make this leap happen? But we don't think that people are fully ready to just switch to that.

So we'll do hybrid with the UI, right? So you'll have kind of Ava here, kind of you're going to chat. Based on whatever you're going to do there, it will start to kind of show you what is going on the web. Navigate you through the interface. Eventually, we'll see what people are doing. I actually don't know what people will prefer this thing or that thing. But we'll play a lot between these two.

Yeah, people do have to get used to the new UI. I remember a lot of us, if you had parents who had computers, they had a much harder time going to a smartphone than parents who didn't have computers. They were like immediately, you get them an iPad or whatever, and they were like, oh, my God, I can use a computer now. So it is interesting in that way. But the use case is obvious. And I think people are right.

What's unique, maybe people don't get. or I appreciate is how much infrastructure you need to have to actually book a flight. Yes, yes, yes. And that's kind of where connecting this to that infrastructure, I think it's very powerful. Talk to me a little bit about, because we'll finish on this question, okay, great, but how many people do you have at Navon now? 3,000. 3,000 people.

And all those people built this other thing, this last generation interface. And now you're talking about, okay, we're going to change the way people travel. How many of them, what percentage of them in engineering are going to be relevant to the new architecture? And how do you think about that as a CEO and how you evolve? Because it's a very different skill set. So I'm old. Yeah. So it means that I was around in 99.

And it happens all the time, right? Web happened, and then cloud happened, and SaaS, and then mobile happened. And now this happens. and probably this one is faster. And I think if you are a developer or anybody, right, you can be a salesperson that knows to sell on-prem kind of thing and doesn't know what the fuck is suss, right? So I think you always need to adjust,

definitely if you are in tech, and you need to learn. And I really didn't know what generative AI is like in November last year, never heard of this in my life, right? So my co-founder kind of knew, but even he didn't really know it, but now I really know. So that's it. You have to learn. You have to adjust.

And if you'll not, you'll have a problem to find a job. That's reality. Yeah. And then how do you go about figuring out who's who in that equation? Like who's come up to speed and who hasn't? I think you see it. I think it's exactly like we talked about these transitions in COVID. And you saw, you know, we are handling something right now.

And we had a board meeting yesterday. And we talked about it in the board meeting in June. And it was kind of a low point of this thing. And you saw yesterday that the team completely adjusted to the problem, to fixing it, and now you can actually see that. So I think if you have a team that can adjust, they can adjust. They can adjust to a lot of different things. And one of them is we've talked about a day after CHETGPT was released.

We've done almost like an emergency meeting. And I was saying it's the thing that can actually make us bigger or the thing that can kill us and really, really fast because of everything that you've said earlier. And the team already adjusted, and you can see how many things we're doing around it. So it means that we took a team that was doing one thing. And we told them, hey, it's not relevant. Let's do something else. And still, there are things.

The hardest thing is with travel agents. Why do you tell them? Because if somebody in the company is building... Yeah, not the AI agency, human agents. The human agents. The human agents. Right. So if somebody is building a model to replace them, what does it mean?

I think you know what that means. So definitely you need to almost finding them a sense. with an mission. Right, right. Great. I'd like to thank Ariel and thank you for listening to us. Thank you. Next up is OXA co-founder and CEO Todd McKinnon. Like Ariel, Todd faced a whirlwind of challenges since he chose to bet on the cloud in 2009. And today he shares his war stories with A16C general partner, David Ullovich. Todd does not hold back here as he discusses the difficulty of being measured as a public company, including missing many quarters in a row, and the tension that can exist between keeping the board and employees happy.

So I've known Todd McKinnon for a long time, co-founder and CEO of OCTA. I'm not going to read his whole bio. I will tell you two quick facts about Todd. One is when I was at Cisco, I tried to buy Octa. That turned out to be really stupid. And I called up Todd and I was like, hey, we want to do some things in identity. Can we buy your company? He's like, are you fucking smoking cracks? Like, do you not know how good we are? He made a smart decision to not take another phone call. And then the second thing about Todd is I realized at some point, I think just before COVID or during COVID, you became a world champion, a CrossFit champion, like one of the top

15 in the world at CrossFit. It was 14. 14. Your number 14 in the world. Don't shirk me, Dave. Yeah. 14, which I am not a CrossFit person, which you may have already known by looking at me. But I think that's quite a hard feat while being CEO of a public.

publicly traded company. So those are my two intros for Todd. I'm proud of those things, but my father, all he ever cares about is my kids. So that's all he calls me up. He goes, I go, I want to talk about Octa business. He goes, how are the kids, Todd? That's good. That's what a grandpa should do. Well, we're going to talk about Octa because I'm not your father. And so you are the only founder and CEO of a public-sively traded company that we have here on stage. So I'm going to start there. How have you managed the whiplash effect of the last few years. You've had massive financial changes, cultural changes, way that you work changes, personnel changes. Talk about how you've managed that as a CEO. Well, I was thinking about

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

flavors, but it's a challenge. It's kind of like what I love about it, proving that we can build something and we can keep going forward and we can do something that we think a lot of people, or we think is very unique to what we're trying to do, and it's a challenge. So, yeah, there is adversity and we're dealing with all this stuff like you all are. But I think one thing about me is that, and I think I have this in common with a lot of people here, is that I'm very kind of challenge driven. So if there's a challenge and I have to fight for something and I have to go through some university, I kind of seek that out. So when it gets stressful and hard and tired, I just go back to that fact that everything in my life, when I've had a lot of happiness or a lot

of satisfaction, it's always been going through some hard times. Excellent. Type 2 fun, as they call it. Exactly. Have you changed the way that you lead your own teams as a CEO, from remote work to in person to all hands, those kinds of things? Like, how have you even just tactically sort of changed the way that you operate and lead? Yeah, like recently. Sure. Yeah. I think a big change I've noticed myself, and maybe some of you have noticed the same thing. Over the last two years or three years particularly, I think three years ago, I myself and ACTA and I think a lot of other people were way too much trying to keep everyone happy. Employees and partners and customers, although I think it's always good to try to keep customers happy and be really oriented on that. Particularly on

employees, there was this vibe and this mindset of if we do anything wrong, if we do something that's going to make people upset, people will quit. We can't. can't keep talent. Oh my God, their stock options might be underwater. We have to give them more stock. If we make some comment internally or the company that they don't like politically, they're not going to like working here. We were very, very, in myself, I was very, kind of like, cautious and wanted to just keep everyone happy. And I think part of that was the war for talent, and part of that was just the macro environment. There was jobs everywhere, and companies were competing and money was free. And I think that right now I'm much more kind of in the middle

of the spectrum. You don't want to be totally careless. And kind of kind of. about employee satisfaction and what employees are going to love and want. But I think we were too far on the spectrum. And so now I think we're more in the middle where it's having more confidence, if you have conviction as a leader and as leadership team that it's a right thing for the business and it's the right thing for the market, you've got to do it and you've got to be clear about it because this can be clear for the employees, what you stand for and what's important in the company, what your strategy is and what your priorities are, it's going to be less confusing. And it also has the effect, it sounds obvious when you say it out loud, but it has the effect of

galvanizing people that are aligned with that and want to do that. So it's a win-win. So I think speaking at a very high level, that's one example I would give. Can I give a concrete example? Please. Because I hate when CEOs talk about this stuff and they're like super high level and like all this word. This is what we're here for. Yeah. And so I'll give you a really concrete example. So we did this acquisition a couple years ago and we were 3,000 people and this company, Otz Zero was 1,000 people. So we're integrating the companies. We did the GNA functions first and then the go-to-market teams 18 months ago, and then we were really, really slow to integrate the security teams. Ot Zero security, Octa security. There was some reasons, you know, like the

security team was kind of embedded in the development team, so there was all these excuses about why upset the Applecart and why make a change. What are we really doing it for? People won't like it. People will leave. But then for stuff that was going on in the industry and stuff that happened to Octa about security issues, it was very clear to me, like getting our shit together for security internally was really, really critical, being the most secure company in the world, locking everything down, and having two separate security organizations for these companies was not the way to do it. So just made the hard call. They're being combined tomorrow. So the debate's over. I don't want to hear any excuses. Figure out how to do it. They're being

combined tomorrow. And turns out some people did leave, and it was controversial, but I think it was just a very concrete example of this shift I've been on. Much clearer for the people that stay. Yeah, exactly. This is what we're about. We're going to make the hard call to do this right for the company. Awesome. How is a public company you get measured every single quarter in a different way than a private company and sort of a board meeting gets measured? How do you think being measured on a quarterly basis by the public markets has changed you as a CEO? And would you have taken anything you've learned there and applied it when you were a private company?

Well, I think this is a big topic. so recently, one of the more interesting things is that I have a challenge because when you're public, you want to set really realistic external expectations and then hopefully you execute and overachieve them and beat and raise. You've all heard the term. So in the last year or so, a lot of companies have really been conservative on their external expectations, as we should be, because what's going on in the macro economy. So internally, you have your internal plan and you're maybe missing it or just meeting it

and you think you can do more. And you're trying to fire your team up to really get aggressive and don't take excuses about macro and we've got to go faster and do more and fire people up. We miss this number, do this. And then externally, you do these earnings reports and it's like you blow out your numbers.

And Wall Street loves you and the stock price goes up and everyone's celebrating and high-fiving. And then you're walking around, around the office and you're going like, I know you got to suspend belief on that for a second because we got to go faster. We just ran down the runway and jumped over a one foot bar. We got to jump over the five foot bar. It's like, come on. So it's a little bit of a different twist on that. But in terms of the being measured quarterly, a couple other things I'll add there. I think that there's a lot of things about being public that are great. Access to capital markets,

You can raise money if you need money much, much faster than raising it privately and at much better terms, although with interest rates it's changing a little bit. That's good. The other thing is that I think we're paying all our people in stock. And it's just it's a fair thing for the employees. People forget this. Like the most obvious reason to go public is that you've paid your people in stock and you've got to give them a fair deal. You've got to let them sell it. It's not fair to stay private for many, many years and then have these weird kind of secondary markets, which is not as liquid as a real deal. stock market. So that's a good reason. And one more thing on this, too, is that it's like table stakes for going public is somewhat of a predictable business, because the main point I wanted to make here is that the investor relations, it's very simple. You might think you've got to communicate a vision and be compelling for the long term and all that stuff, but they're going to look at the numbers. And when they look at the numbers, it's like deviations from plan are speak loudly and get punished or rewarded more than anything else. So you've got to make sure you have somewhat of a predictable business. I don't know how folks went public with the traditional revenue model and

software, they didn't have recurring revenue. Having that recurring base of business and stable retention and stuff makes it much more manageable because once you get out there, you are exposed. But I think if you have that solid business and that stable business, there are a lot of benefits that I think make it very worth it. Nice. I'm going to shift more to the founder journey and sort of building a company. He started the company in 2009. It was the height of the financial crisis. There were pros and cons, but people sort of perceived it to be a more difficult time to fundraise. Let's start with capital raising. You raise money from Andreessen Horowitz, first check.

But talk about the fundraising journey and the company formation of those early years. Well, I was running engineering at Salesforce, and so I say that just to make myself kind of sound cool. They're not sure if it was a joke. It wasn't sure. In this room, that is very cool. Okay, yeah. That is very cool.

This room and maybe zero other rooms in the whole world. I say that because being at that company for six years at the time, this is late 2008, it was pretty clear that cloud computing and as a service were going to be huge. And being at that company, it was pretty obvious to see it because you had us at the app layer were doing well. They called it Google Apps for Domains at the time was going to be like the collaboration layer and email was going to go in the cloud. And then AWS was out, simple storage was out and compute was out, EC2. And you could tell the infrastructure was going to go together.

So this cloud thing was going to be big. It was pretty obvious. Not everyone saw it, but I did. And so I had a great job running engineering and had to convince my wife that it wasn't totally insane to quit. Because from the outside perspective, it was like the financial world was going to the shit. I mean, it was like Lehman Brothers was failing and banks were going away and the financial system was freezing up and the government had to bail everyone out and it was a shit show. And the technology arc was very clear. So for me, it felt like a great time. Then I got out into the VCIS. World and started to fundraise. And you could tell that when you talked to these venture funds that they were nodding and they were maybe listening to you, but you could tell they were scared. You could tell that, I don't know the details, I didn't ask for the details, but like, you could tell they were thinking, do my LPs have money at Lehman Brothers? And when I do that capital call to the LPs, is it going to come in? And they were really unsure about raising. And my co-founder and I

first got introduced to this really exciting new firm called And Driesen Horowitz. It was even before they had A16 Z, Indreason Horowitz. Then we went into a conference room at the Rosewood offices, and it had a laser-printed sign that said, Andresen Horowitz, laser-printed and tape to the wall. We walked into the conference room, and it was Mark, and it was Ben, and it was Scott Cooper. And we sat down at the folding table that was folded out and stood up in the conference room.

And my co-frey, I was nervous. I was like, are these guys going to give us money? Are they scared? They even have money? Yeah, exactly. Did they have any money? And we're sitting there, and I'm looking at Mark and Ben and Scott, and my co-founder looks at him, and he goes,

did you get this table at Costco? And Mark said, yeah. And Freddie goes, oh, yeah, I have one too in my backyard. So the ice was broken. But Mark and Ben, they wrote a check. I joke that we had kind of a little bit of an interesting idea, some credibility, because besides this room, they're probably only two people that think the VP of Engineering and Sales

force is cool. Someone that might be able to do it. But I say that in this is all seriousness. If we would have walked in there three years later, they'd probably been like, yeah, all right, go talk to someone else. So they were willing to take a shot and it worked out great. But it was a scary time. And yeah, those were some of the early memories there. I actually forgot your question. Did you have a question? No, that was pretty good. Like, the stories are the thing that we're all here for. Yeah, yeah, yeah. I sort of just like make up a prompt that will generate our story. That's me. Todd GPT.

Yeah. So continuing that thread, you've had tremendous success, but I had heard from Ben that there might have been a period of like one or two or like five, six, or like eight quarters where you missed your numbers in a row. That happened? It was not all up into the right group. Yeah, we've had the last couple of years for ACTA, we've had some bumps. Well, I mean in the early days. Yeah, I'm getting there. Oh. I'm a stateful chatbot. I can bring it back to the question you asked. It's been rough. And when we were going through these rough times, we had this issue with, it was like a security issue where some hacker claimed that they had access of the system and it wasn't true and we didn't handle it great and it was pretty stressful time

for the company. We had an acquisition we were integrating that we could have done better. So it was some stressful times. And I used to tell people at the company, I was like, listen, this may not even be in the top five of hardest times in the company. And if I were to stack rank that for you, number one would be we raised money in beginning in 2009 and in 2011. Some of you, I'm sure, maybe remember this phase of your company or not yet or maybe in it right now. But But you've been doing it long enough where the early hype and excitement is kind of waned a little bit. You were able to raise money. It energized people.

There was a story and people were excited. They gave you money. You're on a roll. The hype had waned. And there were expectations. It's been a couple of years now. You should have revenue and customers and you had a financial plan and you've got to hit it. But really two years probably wasn't enough.

Like cloud adoption maybe wasn't where it needed to be. The product wasn't quite good enough. And so you're kind of in this valley of death or tough times. And so that was a tough period. And how did we get through that? Well, first thing is we had a board and one thing I did differently, during that time period, I shifted from early in the company with the board particularly. My mindset and my mode of operating was kind of like collaborative in the sense of

there's a bunch of ideas we have, a bunch of ways this could go, a bunch of thought we had, what do you guys all think? And like kind of collaborate and try to get an opinion out of the board. That was a huge mistake. Because when I did that... It's not a democracy? Well, when I did that, the perception, my perception was like, now I have a really strong instinct on what we should do,

but I'm not totally sure it would be right. So if I come out and bang my fist on the table and say, this is where we're going, they may not agree with me and they may think I'm not a good leader. But when you flip that around, what really was happening is when I was saying this is different options, what do you guys think we should do, what they were hearing was he doesn't know what to do. And why are his people going to follow him if he doesn't even know what to do? So I switched my approach and I still remember the board

meeting where I said to myself, all right, I'm going to change my approach. I got vibes from your board members. You guys get vibes from your board members and vibes like Todd, this is a mess. Like you got to do better job. Todd, maybe some people on the board don't have confidence in you, those kind of vibes. Yes. Yeah. Well, I was getting those vibes. And so I changed my approach and I said, I'm just going to be super strong about what I think we should do. This is what I think we should do. We've got to change this, go-to-market strategy. We've got to like be clear about this.

This is the direction we're going. And it just was a dramatic difference. It was like, yeah, they gave me input and it wasn't like all of a sudden they thought it was flawless analysis in perfect direction. But the tone totally changed. And it was like, this guy's going to be in charge. This guy's going to take us forward. And they had more confidence in me. And at the same time, one thing I did that was really,

a step forward, I think, was internally in the company, and this is, just to give you an idea, we probably had 50 people. So it was 50 people in the company, maybe not that, maybe 40, so like 15, 20 engineering and like a few people in sales, GNA. So that's gives you a scale. And we probably, in revenue was our new AAR bookings target for the quarters were like 200 grand. So the whole year was going to be like a million in AAR booking. So it's pretty small, which ironically at the time felt like a huge number, but that's the stage we were. So internally in the company, I kind of had this mindset of, it was almost opposite. It was like my mindset in the company was, I got this, I can do it all. Yeah, I'm the CEO. I was the CEO two years before, but it was really a tiny company with only a

few people. Now I'm a CEO. I got this. I can do everything. I know all the answers. I'm going to be like, make no mistakes. And internally, that was having bad effects. And the effects were that people didn't feel bought in. They didn't feel like they could help. They didn't know how to help. I wasn't sharing enough information. I wasn't giving them the context they needed to help pull us out of this.

So it's like I flipped my whole persona. With the board, I was like, this is what we're doing. Stop checking your BlackBerry during the board meeting. Pay attention to me. I'm the leader. There wasn't really similar to the Blackberry.

It was 2001. No more BlackBerrys. But internally, I was like totally opened up and I said, you guys, these are our problems. We have a lot of problems. I made some decisions. They weren't the greatest.

but together we can open up, recognize the problems, share the data, and we can get through this together. And it really galvanized the team and it got them focused on the problems and really they were part of the solution. And I think even to the culture in Octa today, I can see the reverberations of that switch. It's like pretty open, pretty transparent, pretty team-oriented, bring people and solve the problem and collaborate. So those were some of the things I remember from the formative years. So being a leader with a plan in the boardroom, but having the right team around you and you've had a lot of people with a long tenure at ACTA, but you've also gone through executives

in different phases of the company. I think that's something that founders in the room, either they have gone through that, and after a while they start to think they're the ones who are the problem, or they have not yet gone through it, and they probably should go through it. Talk a little bit about sort of how your executive teams evolved over the course of ACTA,

especially in the early days. So I remember I was surprised by this, but when I became a founder and a CEO, my decision-making actually slowed down. It sounds weird, but as a leader in engineering at Salesforce, I was pretty decisive. It was like, this person needs to go, this person's coming in,

we're doing this, we're doing this. But I noticed myself being slower and more circumspect at OCTA. And as I analyzed why, it was pretty obvious after thinking about it. It's like, at Salesforce, my boss could, like, overrule me or, like, tell me I was doing the wrong thing. And I had someone to help me, basically, above me.

And being a CEO, as you all know, is different. It's like the buck stops with you and the mistakes seem like they're more consequential and difficult to unwind. So I had to really try to get back to faster decision making even though I didn't have that boss that was helping me guide me along the way. Particularly another thing that changed was related to this fastest, particularly on people, this fast decision making is that when you go through a year like 2011 and you start to get some traction and you start to come out of that place where you really thought the company was going to die, you build this loyalty. to people. And five years on from that, when the company started to outgrow a lot of those people and their capabilities and what they wanted to do, it was pretty hard for me and I was pretty slow to make some tough decisions that would have basically, in my mind, I was perceiving them as breaking that loyalty. And I think for me, it was like, I basically had to outgrow it. I had to

outgrow this feeling that this core group of people that got us through these tough days are going to get us forever. But it did take some time. And it's something that if I had to do over again, I'd probably make that shift faster. I've made the mistake in both ways. Like I've made the mistake, we've had new leaders come in, and I've counseled them to go too slow in making changes in their team. Like right before the IPO, we hired a new go-to-market leader. He was great, and he wanted to make a bunch of changes. And I really said, listen, man, slow down. Just don't mess anything up before the IPO. Let us get through this. And it ended up really hurting us like a couple years later. We hadn't made changes fast enough. We weren't scaling fast enough. And now we're like three, four

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

And Todd, I really appreciate you making time out of your schedule. I know you're actually flying up, I think, for a board meeting with Ben tomorrow. Yeah, my whole perspective on all this stuff might change based on how tomorrow goes. We don't want confident, Todd. We want Todd who to do collaborates better. Thank you for taking the time here. You've built an amazing company. You've been a great friend of the firm.

And it's always great to see you. Yeah, thanks, David. If you like this episode, if you meet it this far, help us grow the show. share with a friend or if you're feeling really ambitious, you can leave us a review at rate thispodcast.com slash B6C2. You know, candidly, producing a podcast can sometimes feel like you're just talking into a void. And so if you did like this episode, if you liked any of our episodes, please let us know. I'll see you next time.