Introduction to Bitcoin: what is bitcoin and why does it matter?

First of all, it's fun when we start the term and we get everybody in such good form as we have tonight. I've already had a couple of really good questions to inspire me this evening, so we'll bring those into the agenda. But I also want to remind everybody that this is your series. So it doesn't matter what's on the slides. It's, it does matter what's in your minds. And if you have questions that you want to bring out, that's the important thing. I will say that we specifically tonight, because I have such great guests, are going to include a Fireside chat. I'm going to bring the logs myself, where at the end we'll get a chance to ask questions of our guests and encourage you to do the same. And I think this subject in particular is one which is personal. It's not one where the textbook is going to give you the answer. So I want to encourage you to think about what are the things that you would like to learn from these founders to get from their experience of what they've done. So let me jump right in and tell you about tonight's agenda. First of all, the most frequently asked question that I get is what does it take to build a company? How do I start one? Or any variant of that? And it's really the billion dollar question tonight with each of the founders you're going to talk to. They've each built billions of dollars worth of value. So try to understand what it is from them. It's not an easy thing to do. But I also have some context I want to take you through. Not only do we have the background where obviously we've got a series of different workshops to go through, but also we've got a landscape where it's easier than ever to start companies. And so this question might be one that gets ignored, but I want to talk through it because many times entrepreneurs actually skip the future. They just say, oh, well, if I've got a great product, I'm going to be able to build a great company. And as you know, in one of the workshops that we've been through last semester, products to companies, there are a lot more steps than that, even in terms of creating a product that can be built in a way to take to market, but tonight we're going to talk more about what it takes to build a company and some of the personal attributes about that. We'll bring the three guests up to talk through their particular case stories. And then, as I said, we'll have a Fireside Chat at the end. Now, again, the most important thing I want to emphasize here is why are we doing this? Well, first of all, all these workshops have actually been built on questions from you, both the students and the community, and many startups in and around Boston and even the Valley where we've been getting tremendous feedback. And what we hear always is this challenge about understanding what does it take to build a company. Now, the one question I want to emphasize here is I often get asked, well, how can I be like you? How can I be as successful as you all? And I just laugh when that happens because, A, I consider myself to be like most entrepreneurs, paranoid that I'm not successful and that I've still got lots to learn. But secondly, the most important thing about this that I want you to understand is not what is it like for somebody else, but what is it for you. In other words, have you got what it takes? So in your own personal understanding of what you're passionate about, interested in, you know, want to go out and make happen, have you got what it takes to actually go out and build a real business? And all I can really give you in return are instead of frequently asked questions, a lot of frequently questioned answers. Because frankly, there is no one answer. And that's why this is a subject that's best done an interview and discussion rather than from a textbook. So let's talk a little bit about some of the questions that follow this. Obviously, there's some fairly tactical things like is this a project that's fundable? We have a workshop on that. For those of you who haven't seen it. You can go up to startupsecrets.com it's funding to go the distance and the strategies involved in that. That's a fairly tactical thing. How do I know if I'm ready to do this? Not so tactical. We're going to talk about that tonight. We're going to talk a little bit about the career path that you might take and then what does it mean to build a company versus a product or feature? Again, we're going to talk a little bit about that tonight, but there's a specific workshop on that, the Products to Companies workshop, where we've got some really good case studies on that. But again, I want to get you to raise the questions because as they come to you, that's more important than what we might put up here on the screen. Now, where does this all fit in this Startup Secret series? We have some fairly fundamental courses that we cover, for example, culture and the importance of hiring. That's a fundamental that's in the courseware. And we certainly think it's incredibly critical to hire the right kind of people that help you execute. We also talk about value proposition as a basis to understand whether you've got something that's fundamental enough to go build a company around. Again, you can find a workshop on that. We spend an increasing amount of time building out this execution area because in the end, everything comes down to how well can you build your company as you execute. So the next workshop, for example, is on go to market. There's other ones on business model and so forth. And we've also talked a lot about vision, which is a critical piece in the early stages of understanding whether you've got an opportunity to go after a marketplace and a vision to capture it that'll give you a basis to lead. So a lot of this is covered. But it all comes back to, as you, the founder, think about doing this, can you actually see yourself working through what in many cases is a multi year roadmap to building a company? And so it's hard to bring that to life without having these kinds of case stories that we're going to talk about tonight. But what we're going to answer tonight really is fundamentally this question about have you got what it takes and what should you start with? So instead of these frequently questioned answers, we're going to ask John and Stefan and Gail to walk us through them. I'll introduce them more fully later on. And each of these founders has built billions of dollars of value going through that roadmap. And they'll have all taken their own path. And that's one of the most important things tonight. There is no straight line there. So let's talk a little bit about where we might start. How many of you already got an idea for a product? Okay. Lots of you. Okay. Can I ask how many of you are thinking about building it, for example, in the cloud? 1, 2, 3, 4, 5. Quite a few. Well, the good news is things like the cloud and technology platforms have dramatically reduced the cost of building a product or a service today. And whether you're building it on Amazon or you're deciding to build, for example, an app for the App Store, these days, the barriers to actually building something and getting it launched are really dramatically lowered an order of magnitude, for example, over the last decade. And so this is the piece that's easy. And the ability to get out there and test your product, for example, get to MVPs and figure out product market fit is not the challenge that I think you need to focus on. And the reason is if you look at what it takes in the journey, getting the product and even the product market fit is a very small fraction of what it takes to build a company. So the question I want to raise tonight is does it mean you should just jump in and start up just because you can? Just because it's cheap, because it's available? And the answer is maybe, but let's look at what else might be involved. So the first question to ask for yourself personally is why are you doing this? What's in it for you? Is this about lifestyle? Do you want a lifestyle business because you want to just work for yourself? Is it about fame because you're excited about becoming rich and famous? Is it about power? What else is it? I don't know the answer to this and I'm sure that some of you have got some personal deep aspirations in there that you'd love to bring out. But I do want to just jump to the reality. What's involved has very rarely been written about. But in the last year, if you go and read on, for example, Inc. Magazine or this article happens to be an economist, the reality is starting to come to the fore. People are actually fessing up to just how much pressure it is to say something like I want to change the world. It's an easy thing to say. It's a very hard thing to do. And so a part of what I encourage you to do is really go and think about if you want to change the world, what's it going to involve? What kind of sacrifice is it going to take? And certainly from my experience as an entrepreneur for 20 plus years, it was a massive sacrifice. In many instances it meant putting everything else aside and unfortunately in many cases for the wrong reasons, putting things on hold too, that might have made a sort of more balanced lifestyle. So if you're one of those people who's inclined to do that, just stop and think about how long you're willing to do it. Because here's the reality. In this uncertain world, it's typical that the ventures that you will build today will take about 7 to 10 years on average, 8.3 in the venture business, for example, to come to fruition, to actually get to a place where they, for example, go public and become the kind of billion dollar enterprises that you're going to hear about tonight. So stop and think about that for a second. This is not about a six month product cycle. It's probably about a seven to ten year journey to build a company. And if you look at the numbers. Thousands of companies go through the process of trying to get funding and even of the one that might get funded, Even then, about 1 in 10 turns out to be the kind of breakout that you're going to hear about tonight. So it's not an easy game and it's not by the way an easy game at any level, even if you're successful and you get a breakout. There's been some anecdotal research to show how few companies actually get to be Facebook like or Google like, about 45 in total in a recent study that was done on what's called unicorns, which are these sort of breakout billion dollar plus, multi billion dollar plus companies. So the dream that we hear about is very exciting. The reality is not so easy. Now let's double click on this. Obviously we always hear, just like we're watching the highlights, if you're a golf fan like I am, you see the guy make the 30 foot putt. You don't see the 28 players who missed the 3 foot putts because they're not interesting to watch. Well, some people are honest enough to come back and share that. Steve Jobs was one of them and he made a very prophetic statement, which is it's really hard to connect the dots. Looking forward, we all think that if we've read every business book we've taken every class, well, we must be able to figure it out. It must be a path that's easily traversed. I'm going to try to bring a little reality to that tonight. This is more like the line that you're likely to travel. And there are many ways that we can have some fun looking at this. But in the end, whether it's about funding or figuring out whether you've got a product market fit and how you iterate and pivot on it, whether you get repeatability or not, it's tremendously uncertain. And the only thing I can tell you is that you're going to have to make your own up. You're going to have to find your own path and as you do it, expect the unexpected. So here are a lot of things that we've talked about in classes before. For example, we've talked about how do you get funding? And I get lots of people who come up to me and say, I've got my Series A, I must be doing great. It's irrelevant, absolutely irrelevant. Until you figure out what the customers are actually going to pay for, the money that you've got from investors is meaningless. It's a little bit of What I talk about in the funding mirage, those of you who want to find that article, it's up on the site or on LinkedIn. But one of the things that is important that we talk about is as you start to get customers, how do you prove that you've got validation on your business? Well, little reality. If you get a customer like, and I don't mean to pick on Fidelity, but they're a complete outlier, you will probably find that while they might write you a big check, they're not typical of the next five customers you're going to get because they do everything themselves. They do everything themselves uniquely. They build it all uniquely. The same would be true if you went and got a customer. Actually, I won't keep mentioning names because I'll probably write off half the customers I want to do business with. But every customer in a marketplace is not equal. And in fact, as we talk about in the go to market class next week, we'll talk about the more important thing, which is understanding things like segments where individual customers line up with real aligned needs and where you can start to get repeatability. And that's when you learn whether you've actually got something in the way of a marketplace that could be built on or a product that actually could be scaled on. So lots of challenges emerge. I've got Stefan in the audience, so I can joke a little bit about this because we were both on the board together in the process. But I can tell you there was a point in demandware's history where we had that exact dip there where our business model looked to everybody, including my partners, like it was broken. Like we couldn't implement customers fast enough, that we couldn't actually turn the corner to actually get the profitability that would work. Fortunately, both he and I really saw underneath that and recognized that that was just the timing issue, because the software as a service model, as Stefan and his team were inventing it, was not really fully understood. Those people who didn't understand it didn't recognize the reality was that it took longer to get customers to show the same kinds of profitability. But as they became profitable, they also, in the case of a company like demandware with E commerce, became incredibly closely aligned. Sticky would be the term most people would use with your future and very predictably involved. And therefore your revenue became more and more definable going forward and therefore more and more valuable as a company as you got to that point. So this kind of challenge caused us, for example, in that process to literally be sitting here looking at A funding trough. Nobody wanted to fund the business. We had a really big challenge at one point, getting people to understand what was going to turn into the business. That to us obviously was scalable. And there were many challenges along the way with, for example, team upgrades. And again, not to pick on demand where there would be any company I could probably pick out of our portfolio that goes through this. Where people who are great in what I would call the Lewis and Clark model of no compass to cross the country with no map are not good when you start giving them very clear paved roads to travel on because they keep wanting to find their own path. They're just different kinds of people. So these challenges for things like team upgrades and figuring out then when you've got a business that's starting to grow, should you invest in it or should you get leverage out of it? How should you decide? For example, when you go public, These are massive challenges and by the way, they're years long. This is a 7 to 10 year roadmap that I'm talking about. So thinking about this path to success, I wanted to try to figure out how would I share with you what to think about? Well, the good news is most of these businesses, if those of you have seen my funding pitch, will hear me say this, they're usually longer, they're usually much harder, but when you finally get them right, they're usually much bigger.

During class, we had a limited amount of time to talk about what it is that really makes the path to success. But let's take a couple of examples here so you can understand what trade offs you need to make as an entrepreneur and how important the kinds of decisions you make are to the impact of the business. The first case in point I'd like to use is that of the outlier customer. Many times as an entrepreneur, you'll come up against your first customer and you'll find that their needs aren't really in line with what you thought was your product roadmap. The question here is, is that because your product roadmap is wrong or because the customer is not the right one to pursue? You probably won't know. But what you'll have to do is quickly discern what it is that the customer is asking you to do that's really worth pursuing to help you move the business forward, and whether that's worth taking versus the extraneous features and functionality they're asking for that will take you off track. And of course, there's another consideration you may need to just take that customer for pure cash Flow reasons. As usual, there's no one right or wrong answer. So long as you're clear what you're doing and why it is that you're taking that customer and how you're going to use them as the basis to move the business forward, whether it's your product or your target market or your business model or whatever it is that you manage to validate, then it can work great. But if, by contrast, you blindly take customers without considering how they're moving the business forward, you can very quickly find yourself with products that are bloated and timelines that extend and resources that are wasted as you don't converge on a product market fit. Hopefully you do find a series of customers whose needs are the same and who you can deliver consistently to to form the basis of your initial minimum viable segment and to start to build some momentum in the business. Now let's move down the track and see what happens as we start to gain more customers. Maybe you're finding that they're all actually aligning quite nicely with your value proposition, or maybe not. The question is, if they're not, do you pivot or iterate? And what's the difference? Well, let's consider what I've seen many times. Entrepreneurs often feel like if it's hard to meet a set of customers needs, they're struggling and their product is the issue. And in fact, that may be exactly the wrong time to pivot. The right thing might be to actually dig in and hone in on the customer's problem. Rather than worry about what your product is doing, understand what their business issue is. Then, as you uncover that issue, you might discover that while your product is a part of the problem, a greater issue is how it's integrated with everything else that is being used in the customer's situation, and in which case the solution might be to include some services and maybe even change your business model in the way you're packaging and pricing your overall solution and delivering it to the customer. That iteration, rather than pivoting away from that market, might be the key to finding and uncovering some real business value on which to accelerate the business. What I see in great entrepreneurs is often that they see these problems as opportunities. That's to say, they dig in and figure out how to get closer to their customers and expose the underlying opportunity that might give them the basis to build something really valuable in the way of a substantive solution that can be differentiated and distinguished. So again, there's no right or wrong answer here. It might indeed be totally appropriate to pivot away from the group of customers that you've started out with. They might be leading you to a place that isn't delivering value. But by contrast, it may be totally inappropriate to pivot away if all you're finding is that meeting their needs is hard. After all, if it's hard and it turns out that instead of pivoting away from the problem, you can iterate around.

It and really dig in with the.

Customers to figure out how to meet their needs, then it's more likely that you're going to be delivering something of real substantive value at that point. Now, to give you an example of some of the other challenges you'll find on the path to success, there are things like the funding mirage which leads people to believe that just because they've raised money, they're on a successful track, or the challenge of reworking your business model, or the near death experience that can come out of nowhere. So, such as a major competitor entering the marketplace, or a lawsuit that comes at you unexpectedly, all these things are just sent to try you. And the key is not to lose sight of what you're really doing here, which is building something for the long term in many instances. The hardest times I've faced as an entrepreneur have all been about figuring out how to just take one step forward. And if you keep doing that, you'll find that you can very quickly move to a place where the view is very different, and the challenges that you've left behind put you in a position to distance yourself from competitors. But as I suggest here on the chart, one area never to take for granted is your human capital. It's always the most important capital in your business, and figuring out how to constantly develop and evolve your team and if necessary, upgrade it is a critical part of the success of the business. And finally, as you do start to get real repeatability, you'll almost invariably be faced with a challenge of whether to focus on growth or getting leverage out of your business model. I can tell you again, there's no one right or wrong answer. Sometimes the market is going to reward growth, and it'll be worth just investing in and building out your market position so you can really dominate it. But other times, it'll be important to figure out how you can show real leverage in your business model to put yourself in a position where you can control your own destiny in a profitable manner. Whatever the case, consciously make these decisions with a view to how it is you're building lasting value in the business in a way that can sustain the business to ultimate Long term independent success.

Here's the reality. There's a game you've got to get used to. It's called the ungame. If you're going to have a breakthrough, if you're going to make a breakout, you're going to go into uncharted territory. You're going to be in unexplored areas. You're going to have undefined basis on which to figure things out, like your business model or go to market. You're going to run into the unexpected because nobody's been here before. And you're going to have great uncertainty. So if that's what you've got to expect, what is it that you should do to play in this game? How can you be an entrepreneur that takes advantage of the unexpected? And what should you do to try to master this game? What rules should you write? And this is what happens in the real world. The real world is a world where you have to figure out some things that will give you a basis to win in the end game. So I've spent a lot of time with great entrepreneurs and I've spent a lot of time with great CEOs and the combination have shared these five watchwords. This is what I've culled from it. First of all, you have to be a realist. In the end, when you run into a problem, you need to confront it head on, shine a spotlight on it and be very clear about what you're seeing. That brings out the second key point. Give clarity to people so they fully understand the situation. So the key thing is to accept it. And then with humility, try to get the customers, partners, employees, anybody who's involved in your business to work with you to understand that problem and how you might address it. And based on that, once you get to a place where customers actually are with you, they understand that if any empathizing, if you will, with what you're dealing with and so is your team, then you can start to establish a basis on which you can get credibility back by explaining, what have you learned? Perhaps I shouldn't have only had one supplier. I should have had a couple, shouldn't have put myself in a position where I was dependent in just one case. And then build the credibility by starting to deliver, deliver your product or your service or your improved solution better before you start to, for example, measure whether you're back on track. And so these things, these watchwords, humility, credibility, they're not perfect. They're just examples of things that you should learn to develop as an entrepreneur, to play the end game. Now, I'm going to give an example because it drives right to the certainty issue. The certainty is eventually turning things to a point where instead of you deciding that you're doing well, you create a series of metrics from the outside in to determine if your customers are actually appreciating what you've done. So the case example I'm going to give is from my own experience. We were dealing with, there's about a $30 million customer for us, just to give you a sense of how significant this was. And they rolled out a new product, and we had that product integrated into our stack. So we were totally dependent on them. Turned out that neither our integration nor their new product had been tested properly. And we went into a situation with our customer where we were measuring risk for them for I don't even know how much, but I know it's hundreds of millions of dollars worth of transactions. And the results that were being reported unknowns to us were wrong. So now what do you do? We called the team together, we said, okay, what do we know? Actually, we didn't know anything. We had no idea why these results were coming out wrong. Nor did the customer, nor did really our engineering team. Everybody was trying to figure out who to point fingers at. That obviously wasn't very constructive. What did we do? We decided we'd get to clarity on what did we know. So we took our piece, they took their piece, the customer took their piece. And we very humbly said, look, we're probably all going to suffer as much as we possibly could if we can't figure this out. And in fact, there was a particular woman whose job was on the line, who was very senior, who said, look, obviously we need your help. And we said, vice versa. We do. We pulled the whole team together and we basically created a single point for all of us to actually understand. So in other words, we took our customer, we took our team, we took our partner, we brought them all together, and we said, we're just going to have to try to solve this. And we got humble with each other about doing that. Then what was interesting about it is that we learned a lot of things about each other. Like, wow, we had this extraordinary process. We rolled out software without ever doing integration testing at the customer level. We might have done it at the product level. We didn't do at the customer level. And worse than that, we never, ever went to this last point, which was to figure out how the customer actually saw the final end result for their risk metrics. We never did that. We just assumed that if the customer told us it was working great, that it was working great, but we could have done that testing end to end. So after we fixed all of that, what do you think happened? Sure enough, everybody built a much stronger solution. We ended up turning that customer into a much larger customer. So from tough stories come great results. If you're willing to have these kinds of, if you like, attributes built into your approach to building a company. But this is not a usual game. It's the ungame, as I call it. There's a lot of unexpected stuff there, and there's a lot of things that I encourage you to think about. Do you have those kinds of attributes? Do you want to go through that kind of trauma? Are you willing to put up with that kind of pressure? Are you willing to do what we were doing in this case, which was pulling all nighters, pulling all sorts of people together to go to the absolute ends of the earth to figure out how to get through these kinds of challenges. They're the norm. But the good news is founders are unconventional people, and in many instances, this is what their core makeup is. And if you are one of those people to have that dedication, that absolute drive to see this through, in other words, that 99% perspiration, then you absolutely should be going after building companies. This is what it takes. And there's no doubt that no matter what your idea is, if you've got that kind of drive and dedication, you want to work through things, you can do it. When you look across all the founders who are here in front of us tonight, I think you'll find, as you hear their stories, that there's a fairly typical thing that founders have. They are both fun and fundamental drivers. In other words, it's not all they are for their own reasons, excited, enthusiastic, passionate, driven about what they're doing. And they're solving some fundamental problems. And it's not one or the other. It's very rare that you'll find an entrepreneur who isn't, in some way or another, driven to do something significant, who's also not enjoying themselves. It just. You don't have the energy. If you're doing that, if it's something that you're strained and you're laboring over, it's going to be very tough to drive yourself through that journey of many, many years. But by contrast, imagine if every day you get up, and as one of my entrepreneurs said the other day, work. This isn't work. This is my passion. This is what I love doing. And you're solving a fundamental problem. Imagine how powerful that combination can be. And so that's really what we always look for. It becomes the fuel for the end game. It's the sort of competitive drive in you and if you like the underlying capability that gives you that ability to go out and make a difference every day. So some of you have been in my hiring class and you might remember this question. What would you choose to do if today was your last day of work? Some could be day, it could be week or month, but what would you choose to do? It's a pretty good question to ask yourself if that isn't what you want to start a business around. I'd probably say forget it right there because if you're going to be that excited about it that it's the thing you'd want to do if it was the last chance you had to do it, then it's probably a great basis to think about it. But if it's just doing something to scratch an itch or maybe to try it out or just do it for fun or experiment with, I can tell you now it's very unlikely that it's going to turn into a huge business that you're going to want to spend the next seven to 10 years on. Now, not saying that any of these things, as you know, are rules by contrast. And as I like to say, the best questions are the ones we haven't asked of ourselves. So I'm sure there's reasons why any of that kind of thinking could be questioned. But in general, the thing that I seek over and over again is entrepreneurs who are so driven by this that if you gave them every option and any chance to do anything else, they'd still pick what they're doing and there's nothing that they would rather do. This is the thing that they're so excited about. They just can't wait to get up in the morning and crack on and solve whatever problem is they're dealing with. John's nodding his head, so I'm sure he'll give you some confirmation of how he thinks about it. Now, some of you know that there's another set of challenges that come up as founders around, well, what role do you play? And I want to tackle that because Noam Wasserman, who is a tremendous professor here at Harvard, has written a great book on the Founder's dilemma. And one of the key things that we've been lucky enough to see him teach and share stories on is this dilemma of Rich versus King. So this is one of the other questions I want you to ask yourself, and we don't have time to go into his entire class tonight, just pick up his book or jump in the class. For those of you who are lucky enough to be at Harvard, and it's really to think about to that point about why are you doing this? Are you doing this for the money or the power? Because it's very unlikely that you're going to be able to have both. Trying to be a founder who is running everything and is going to make it possible for the rest of your team to contribute is very tricky. You've got to leave room for other people to be able to scale your business. And that could be people who are obviously contributory to your weaknesses, complementary to your strengths, or otherwise able to share in that power to enable you to build your business. So again, if you're a founder who is determined to own everything, control everything, run everything, go have these hard discussions with your co founders, with your other employees, and think about whether you're willing to make the trade offs that it takes. Go through the exercise of the rich versus King model as Noam brings it up before you jump in and say, I'm ready to devote the next 10 years of my life to this. Those are real trade offs. These are real things you have to work through. So I also get asked a lot. Well, there must be some attributes that you just always need in building a business. Yeah, there are. Here's one of them. I don't think you could ever have too much EQ in a startup. Now again, in the hiring class, we talk about three reasons why I talk about speed, teaming, partnering, and the ability to, for example, to reconfigure quickly. I'm not going to go through all that tonight, but I will say that it's obvious to me that good entrepreneurs build great networks and relationships and I'm only going to pick on one of them tonight. It's the number one one, and that is building relationships with your potential customers. If you can't do that, forget it. You have to learn very early on how to understand what the customer's view of your potential product or service is and to build a relationship with them that is truly intimate so you can figure out what it is that they actually need and what it is you can do to meet their need. And so how do you do that? Well, I've got a very good introduction to make at this point and that is somebody who I saw wear many shoes out in the process of building his customer relationships. So a very warm welcome to John Hershtick who's going to come talk to us about onshape and before that, his first business.

Thank you.

Good to have you here.

Thank you. Michael and I come here tonight as a speaker to teach, but also as a listener to learn. And I can tell you that 30 years ago I sat in chairs and classrooms trying to learn about entrepreneurship. And you never stop learning new ideas, you never stop picking up things. And so I enjoy Michael's comments. My hope tonight is to share a few minutes of remarks with you, to hopefully teach you some of the lessons I've paid to learn over the last almost 30 years in startups. And that would be my goal. And if I can save you one problem that you don't have to personally go through one thing that you take away, that would be great. And more than one would be a bonus. My background, Michael pointed out, most notably, I'm the founder of OnShape, which is a new company here in Cambridge. We don't have any products released yet. We're working in the CAD CAM field. We're funded by Northbridge. Very happy to be well funded by Northbridge. Prior to that, I was founder of SolidWorks in 1993 and stayed there 18 years. And before that I had founded another venture funded company called Premise. I've also been on boards and advisors to many other companies and I've also done a few other things in my life. And I want to encourage you. You probably all have experience that you may not realize is important to founding a company. And I want to mention that in my case, I was on the MIT blackjack team. I worked as a professional magician, I was a stamp dealer with my father. I worked in, you know, sweeping floors in a drugstore, I worked in a restaurant. Every one of those experiences taught me some things that with all due respect, are just as valuable as things you'll learn in business school or even starting companies. I organized my remarks here over the next few minutes around. Five key questions. One, you have an idea for a startup, is it a vision or a hallucination? You know, because two, are you building a company or a business? Three, the big question, should you do it? Do you have what it takes? When is the right time and who else do you need to get involved? And I'll just touch on these for a few minutes maybe to seed thoughts and discussions for later. I like to say, you know, visions and hallucinations look exactly the same and feel exactly the same until you really try to build them and realize them. I've learned in my career, I've been fortunate enough to have some success, but I've also thought of some ideas that were terrible ideas and they felt the same as the good ones. You know, entrepreneurs are people who see things that aren't there. Every entrepreneur sees something that doesn't exist and says, I know that's going to be great. I know if I build it, they will come. And so much of what you have to do early on is pressure test your thinking in any way you can. How can you tell the difference between something that is really there and something that's just a mirage? And also remember that big visions, big dreams may not be any harder than the small ones. So thinking big is fine. You know, sometimes we think too small. It leads me right into another thing about division versus hallucination, which is today, as Michael said, it's easier than ever to start a company and harder than ever to build a business, in my opinion. You know, I'll ask if people agree with that. Company's a pretty easy thing to start. Back in the day, you know, starting a company meant spending a lot of money on legal work, having an office, buying expensive equipment. These days, you don't need. You don't need an office and you don't need expensive equipment. It's pretty easy to get a company. A business, though, is very hard to build. A business is very different. A company is just a place. A business is an ecosystem that's thriving. The key issue that in my opinion separates ideas for companies from great businesses are markets and customers and buying. When you think of markets, don't think about a pie chart in a business school presentation. Think about a market, like a farmer's market where people buy and sell things. That's a market. Think about people buying. Buying is all done by people, okay, except for computerized stock trading, but those are programmed. You know, buying is a human activity. It's not very logical. Logic is used to justify people's emotions. Okay? And you really have to. I think great entrepreneurs understand buying. If there's only one image to take away from my talk tonight, it's this one. I always pull out this when I speak to groups. Everyone know this is anyone? It's a wallet. Any guesses on what's inside here? Money. When do I pull this out and take money out when I'm buying something? Okay, this is what you have to beta test. This is what you have to understand in your plan, okay? It's not, you know, it's not how to distribute cloud computing servers or how to assemble you know robots or 3D printers. It's understanding if people will buy. And that, to me, is the number one issue today. It's gotten more this way as product in some ways get easier to build. So you really have to think about people and how they buy things. Just think about that and draw on your own experiences. How many people worked in a store of any kind? McDonald's shoe store, anything that's really valuable experience for your enterprise. Think about your vision, your hallucination, and think about those days when you were standing behind the register at the Gap watching why people bought this kind of jeans, but not that kind. Try to draw on those experiences because you see people buy. We all buy things ourselves. We're all buyers, okay? We all use wallets or electronic versions of. Get close to customers. If you want to figure out if people are going to buy, get as close to them as you can. Feel it. Feel their needs. Feel what they're doing when they're buying. Try and get near your customer when they're buying something. Talk to them about something they buy. Don't listen to them tell you what they like. Necessarily, that's very dangerous. What people like and don't like is one thing. I'm more interested in what they spend money on. You know, why do they spend money on it? You don't have to build a product that people like. You have to build a product that people buy. Ask me how I know that. Afterwards. Get close to the technology, feeling what it can and can't do, feeling what people will pay for. Should you do it? Should you start a company? There's a couple, you know, when I sat the first time around, thought, should I start this business or not? Should I start or not? I thought about all these risks. My friend said, john, you know, there's these great risks if you. If you go and start the company and almost everyone will talk about the risks of doing it, okay? But I also want to point out the less obvious risks, which are the risks of not doing it, okay? People will tell you, well, you might be too early. The world might not be ready. There's also a risk that you're too late. And you got to think about these. I want to just present it as balance because I don't think people often think this way. So the risks of doing it, you lose income, maybe you're quitting your job to do it. You risk your professional career. It's all on the line. By the way, my career is on the line again. In my new startup. I could have retired in my Industry of CAD software and, you know, gone out with a, with a trophy, so to speak. But I'm trying it again. I'm laying it out there. My professional reputation, failure. Some people can't handle failure. My theory, I have a whole slide on is failure is the neighbor of success. Failure and success are neighbors. Okay? They both live in a different place than mediocrity. I don't know if that makes sense to you. Think about it. You know, so to me, success and failure are meta. Stable. You know, they're. They're right next to each other out there. And the biggest successes have the most in common with the biggest failures in some ways. I don't know if you get that. Think about it. Then there's the personal toll. Michael said it. Don't start a business thinking you know you're going to flip it in six months. And you know, people come to me all the time. Well, we're thinking we could sell this in 9.2 months. I don't know what that's about. It's not building a business. I tell everyone. It's many years of hard work. There's. I tell prospective employees there's nothing easy or fast about what we're doing here. By the way, a great, A great thing to look for in your investors are people who think that way, too, because it is a. That line. Michael Drew is totally right. And you want investors who are used to that kind of journey and aren't surprised by it. So those are some of the. These are kind of obvious risks. You've probably already thought about it. What about the risk of not doing it? Okay, what if you have this great idea and it's the best idea you're going to have in a decade or two and you don't do it? Then you have this missed opportunity, you watch someone else do it. How would you feel about that? Not really. Good. You got to think about this. It's a lost professional opportunity to advance your career. It's a lost opportunity for fun, lost money. You got to think about that. You got to look at both of these things. Risk of action and risk of inaction. When is the right time? Well, I'm an MIT guy from down the road. We like equations or inequalities. So I present to you a couple inequalities. When's the right time to start? When you start worrying that you're too late. You worry that it's too late to start. Starts to be greater than. You worry that it's too early. That's a good time. To say, hey, maybe I should start this thing. When you start to think that the risk of not doing it is greater than the risk of doing it. Okay, that's, that's part of the motivation. I thought, why did I start another company? I had a great job at SolidWorks. I love the place. But I started to feel the risk of not doing things was greater than the risk of doing things. Think.

Yeah.

This just get you thinking. Who else do you need on the team? We have a saying at onshape and at solidworks, hiring is the most important thing we do. We're building, we're trying to build a growth company. It's a little different if you're not building a growth company company. We're all, I think, thinking about, you know, companies where the revenue plan looks like that, right? You know, the hockey stick. I've never known a great business built by one person, a growth business anyway. You know, again, you can build a one person business, but most of us aren't thinking that way. So you need a team. You already know what a good team is. People say, what's a good team? Everyone here knows something about picking great teammates, right? You've been on sports teams, right? You know you're working in group projects, right? In different classes. If I said go to the. How many of you are students? You know, take the last class you left and the next time you go to that class, the professor says, divide up into teams because you're going to be building something. You know, you're going to be. You have any idea who you're going to take? There's certain people you're drawn to, certain people you know are going to get the job done. Those are the people you want. You already have instincts about teams. Maybe you're, you're married or have a significant other. I'm lucky enough to have my wife here tonight. And that was, that's a great decision in picking, in picking a teammate, a partner. And so, so you want to pick. You already have experience. Don't think that your entrepreneurial team selection is different than other situations in life. Hire people who scare you with their competence. You're interviewing someone, they're sitting across the table from you and you think, wow, they might be a little smarter than me. They might know more about this market than me. You know, they might be a better programmer than me or better salesperson. The weak entrepreneurs shy away from those people. They say, whoa, I'm looking for someone low level. Not you. You're scared of me. The good entrepreneurs say, this is Who I want on my team. You don't want anything fair about your team. You want a completely unfair advantage. You want to get. It should feel like you're on the Boston Celtics and you're playing the local high school kids. When you get on the court, you know, that's what I want on my team. That's the way we hire. We want nothing fair about our team. We're not going to make it fair to the other guys. We're going to have all the best people on our team. If you feel you're still needed, then your team is not strong enough. Not only lesson for yourself, but if you're going to build this growth company, you're going to be a thousand people in two years. You're going to need layers of management. Finally, team building is an art. I like to say it's not like building a brick wall. It's like building a stone wall. Anyone watch a guy, a stonemason, build a garden wall? They pick up stones and they fit them together. They're each unique and they fit in interesting ways. That's what good teams look like. Too often we get into a cookie cutter, the brick wall, and we say, well, we need a programmer who has 1.7 years of C. You know, that doesn't work in real life. Okay? And by the way, anyone guess what this wall is like? Can you see that picture? You get it? There's one big brick, you know, there's one star of the show, and all these little. These teams don't work. This is what good teams are. Fit it together piece by piece. Finally, a little commercial. If you're interested in shaping the future of cad, we're hiring people. We're looking for early users. And I always say that. And I just left a meeting with our VP of marketing, who started by replying to one of these pitches for help wanted. Thank you very much.

Now you can tell where I wanted to leave the time at the end to ask questions, questions of people like John. There's so much richness to his story. Now. He's also too modest to tell you, by the way, that his first business, SolidWorks, that we were lucky enough to back 20 years ago. There you go. Now we're all scaring ourselves here and showing our age.

First investment.

Always a good sign when you can't remember. But John went on to build a business there that was truly something that was enduring, and that's the real measure of a founder, is that they've created something that is so substantive that it doesn't just Blow with the wind. It's actually something that's being used today all over the world in all sorts of manufacturing processes. And that's what I hope will inspire tonight is some of the entrepreneurship that can do that. So thanks, John, for sharing the story of onshape where he's been bold enough to do it again. And that again, is something that I hope we'll get to understand a little bit later this evening. So now one of the questions that often comes up is when is the right time for you to become an entrepreneur? Timing is a tough thing to try to assess. Is it right out of college? There's plenty of stories of people who just drop out of college. In fact, we're going to hear one tonight. I think Stephan is a self professed dropout. Am I right? Indeed. So there you go. There's one way to start it. Is it after you've got some real work experience? Is it, for example, after you've gone and worked for a large corporation or is it just whenever? Well, it's a tough question, you know, just using the obvious. It's when you, for your reasons, are ready to tackle the opportunity. And I think John laid out a perfect framework there in fact, because I knew he was going to talk about this tonight. It's almost like that fear of being too early has now suddenly got to the point where it's greater than or equal to the fear of being too late. And I will say that I think that's a great way to embody this because there's something that eventually causes you, you to say, I've got to move house or I've got to change jobs or I've got to start a company. And at some point, you know, it, it isn't something that you're going to be able to write down probably in absolutely clear logic. It'll probably be at least as emotional and guttural as it is anything else. But I do think that most entrepreneurs reach that point and cannot stop themselves and there is nothing that will stop them at that point from going on and making a success of whatever it is they're going to do. So of course a lot of people say, well, that must mean there's a certain amount of experience or you've reached a certain age. Well, here's the truth. Most people would describe this as a bar chart with a median curve, a bell curve in it. I describe it as a lot of stats. It basically proves, yeah, maybe there are more people in their middle age who go out and start tech companies, but there's nothing stopping you in your college years doing this. You may have more experience later on, or you may have more fear later on, which is probably why you have people 55 and above doing less of these. But doesn't mean to say you can't do it. You're still going to have to establish for yourself what your premise is for it. In fact, I'm going to give you two reasons why both ends of the spectrum are really interesting. First of all, I think one of the greatest things about youth is that ignorance is bliss. You actually are totally unaware and unlimited in terms of what you think is possible. And it's a fantastic time in life because you have nothing to lose. Seriously, I've been there. I started my first company at 18. I had no idea what I was doing when somebody said, would you please program a portfolio analysis system for me? I want to train bonds. I didn't know what a bond was. I thought it was something that James in a movie starred in. So it was literally to me, like, okay, why not, I'll do it. But you know, the beauty of it was I had no idea what I was going to be challenged to do. And it was fun to go try to break the rules. And sure enough, we figured out how to do bond trading portfolio analysis and sell it to the city of London.

Great.

Of course, then I woke up the reality that, oh sheesh, you have to support this stuff and there's ongoing costs and oh my God, I have to still pay my bills at university and do my classes and all the other things. And that's where the other side of this is really useful. Experience is great. It gives you confidence. You have stronger networks, deeper relationships, and obviously in many instances, some resources to fall back on and unfortunately more to lose. So that's why you see that bell curve. Tail off. So what do I think is the answer? There isn't one. Actually, I think some of the best teams to the exact picture that John put up there for you are combinations of youth and experience. Youth plus experience equals success. In my book, the simple, if you've seen it in my hiring class mnemonic that I use is yes, youth y + experience e equals success S. And I really believe some of the best startup teams have exactly that. Now, by the way, it doesn't mean, say your co founder has to be deeply experienced. It might be a board member you bring on or it might be just somebody who is an advisor. But finding that way to bring that together is a really great ingredient of many of the best companies. I've seen. Now, if you don't believe me, you only have to look in history at some of the greatest Nobel Prize winners or innovators, et cetera. Many of them are well into their middle age before they do great things and in many instances they come back as great second acts like people like Steve Jobs. But I wanted to share with you a story tonight that is very personal to me because. Because I'm lucky enough to have witnessed it over the last decade. Plus actually of Stefan Schambach, who started a company that today is lucky enough to be able to call itself one of the true pillars of a new wave, and that's E Commerce. So with that I will introduce Stephan and hope you enjoy hearing his story as much as I've enjoyed witnessing it. Stefan, welcome.

Thank you, Michael. Well, I would like to give you a quick introduction and then explain a little bit how I got to become an entrepreneur. And later I will explain how demandware got started and we'll share some of the learnings in particular when it comes to building B2B cloud based companies. I'm a tech entrepreneur, I'm a college dropout. I grew up in East Germany and when the war came down, staying in physics didn't sound like what I wanted to do for the rest of my life. So I started a small company on the side. I rather liked it. I sold it, started another company. First product failed. Second product was something that we now call E Commerce, but at the time we didn't have a name for it. We basically co invented. Other people had a similar idea probably at the same time. But we co invented E Commerce and co invented the shopping cart. We weren't the first to patent it, we didn't know what that meant. But anyways, we eventually were able to attract some venture capital still in East Germany. One of the investors had a connection to Silicon Valley. I said I want to be in the US and in the Silicon Valley in a place where I can find the people who can help me market this. And they were crazy enough to fund this. I mean I was basically 22 years old at the time. I didn't speak English, I was still living in East Germany. I had no business education, no computer science training, at least not formally, none of this. They still decided to fund this and actually we turned out to be a rather good investment. It's a company called Intershop that went eventually public in 1998 at the Frankfurt Stock Exchange and eventually added a NASDAQ listing two years later. As you all know, around 2,000 or after 2,000 times were getting really tough for.combust what that meant for our customers who at the time were big corporations, big retailers who would buy E commerce software from us. They felt that oh, the threats from the Amazons of this world, they go away so we can stop investing in E commerce and the bottom fell out of our business so we could no longer sell these expensive client server based e commerce enterprise software packages through these large companies. And I think for three years or so all I did was restructuring one after another. The company survived and is still around. But while I was doing that I thought I had sort of overlooked a change in the, in the industry. And that was when companies started to question the return of investment on complex enterprise software, on buying, owning and operating complex enterprise software. There was no replacement for this yet. And salesforce.com was very new and only a few people knew about it. But the buying pattern already changed. Nobody wanted to do this anymore. In particular not in applications that at the time were seen as sort of, you know, non mission critical. And so I was wondering whether there's what we call cloud computing today could be applied to a mission critical application or something that would soon become a mission critical application. Now this 2003 was about the time when Linux became a little bit more stable, when blade computing became an important industry trend and Salesforce was a little bit more prominent, at least for people who would follow the industry. And I thought it might be possible to turn an E commerce platform into a cloud service banking on these trends. And I was basically still in my old company. And for the entire year of 2003 I tried to basically see if we could turn the company around into a cloud company. And it was frustrating. I was basically the biggest shareholder, I controlled the board, I could do whatever, but I could not turn the company, I could not marshal the resources together to build a new product that was very different, that had a different business model. Turned out later Siebel had the same problem. Therefore they died or they didn't die, they were quite by Oracle. But so cloud seemed to be very different. Yet I was convinced by the merits of having a cloud service to run mission critical enterprise applications. So eventually I took the decision to leave my own company and start from scratch because I felt that would be the future. It was a tough decision, but basically one that I thought if I don't do this, this was early 2004, then definitely somewhere else we do it and I will regret that I never taken the opportunity. That then became Demandware. Demandware basically is in the business of helping the world's greatest and most successful brands to increase their revenues, their online revenues in particular, on our cloud platform. And what sets us apart is that we have a shared innovation and success model. You can look us up on the web, but I think most of you or some of you have heard of us. Basically most of the fashion brands and many other consumer brands use Demandware on a day to day basis and it is mission critical. It's no longer just a few percent of their business. It is critical to the customer, how the customer are perceiving the brand and it's critical to revenue and profits. I would like to talk a little bit about sort of what I see as key success criteria in particular for B2B startups or B2B cloud startups. Because I think when it comes to enterprise software that is only cloud, there is no other model left that's worth considering. The first thing is logical. You have an unmet need that is being turned into a vision and eventually a strategy. And for Demandware, let me quickly explain what that was. And again, this is what I saw in 2003 happening at Intershop. The traditional model was basically build and run. You know, you would basically buy a piece of enterprise software, install it, customize it through consultants and so forth. And while companies enjoyed or customers enjoyed to have total control of the process, they regularly just messed it up or the consultants messed it up or it became a problem later in terms of maintenance cost. And so it became enormously costly and difficult to stay current and to keep innovating. On the E commerce website. Now, there was a time when outsourcing or the ASP business models seem to be the solution, but of course they were not because they would simply move the build and run model into a hosted facility and basically end up producing the same problems for the customers was even worse because what separated you from your service was now a 2 inch thick contract and what was not in there you couldn't get. So innovation became even more difficult. And that was the situation at the time. So what we came up with is a model cloud based model that first of all put the controls into the hand of the business people. So we would sell to the business people, not to the IT people. And our immediate customers are merchandisers, people who decide what gets sold at which discount and where in the catalog and so forth. And we wanted to make them productive and let them do everything without ever talking to programmers if you could help it. Second, we would basically retain some of the advantages of the build and run model by giving providing customization capabilities, even though it's a cloud based platform. Third, we wanted a shared innovation model. We wanted to provide innovation all the time to our customers. So basically automated software updates, input from all our customers, using the vast amount of data that they all create and learning from it, and then systematically applying this to software enhancements that at the end also turn into revenue increases. That's basically what that does. And the last point least risk basically means cloud services run correctly can actually power mission critical applications that always have to be on, that can never basically have an outage. And we succeeded in building that second team. There was a lot said already by John about team. You got to have a fantastic team and when you start, you cannot have the team complete for all times. But you need to have a really good Nucleus to make enough headway in particular when it comes to the product and the early customer. And this is basically our early team at the day when we got the term sheet signed. At the time there were basically four. With the exception of Tom, who was early sales vp, everybody is still associated with the company. So that has been enormously of enormous importance. I think today if you build a B2B software or B2B cloud service, it is critical to have a shared innovation model. In other words, and together with a shared success model. I should probably put this on here. Customers today expect that you solve their business problems and not that they dictate what you build and then you hand over a cd. So this is really critical. And in our particular model we charge a revenue share instead of another fee. And what it did for the company is that every employee at the Menwear knows whatever they contribute, for example to software features, as long as it helps to increase revenues. It's helping everybody in the ecosystem, not just us, not just the customer, but also every other partner who's participating here. You need some unfair advantage. For us, it was among other things that I had done this before and that I could pull a team of people, more than just a ricker, but I could basically some engineers had left my old company so I could pull them over. We were able to secure a contract where we could use a part of the intellectual property of my last company. So that was the unfair advantage. Why is this important? I think it saved us about one year or one and a half years in company building an R and D. And I don't believe that we would have attracted financing without that. So you got to have some unfair advantage somehow. You also want one or better multiple trends that work in your favor. And that's a really important thing to think through. In the case of demand there, it's basically on the one hand it's global e commerce. E commerce is growing by you know, 14 to 16% every year. You know, there's cloud software which is clearly a Trend. It's about 18% a year. And you know, there's global retail, of which E commerce is only representing something like 6%. It's destined to grow. So you need these trends. If you have one of these trends against you or shrinking the size of the addressable market, you have a problem. And lastly, you need smart money and you need lots of it. We would not have been successful building the company if we had gotten just the money from both our backers, Northbridge and General Catalyst. We've gotten a lot of help. I mean, let me tell you what I think. VCs can really be helpful. They may claim all sorts of things but you know, for one thing I think the biggest help was in attracting talent by far. I did not have a network in Boston and I was really reliant on, and I was hitting Michael all the time for the different positions that we would be hiring for. So that was really helpful strategy, board work. Later when the company was, when we had to make the decision at what point do we think about going public? There are many points in the life of a company where we have to have true business partners who have a stake in the company and lots of it. Let me come to that. The manpower has basically gotten $63 million of investment. It's basically in the corridor of 60 to 80. That's sort of the average for an enterprise cloud company. It takes that amount of money these days and we could, because of the business model, we could not have done it with less. It's impossible. Everything is back end loaded. I mean you develop the platform for a while, then you have the first couple customers that are non paying customers maybe or they're way too small, but at least they allow you to experiment. Then you try to sell to real business. This is where we had this gap, right, because they have a much longer sales process before they trust this little startup to run their e commerce website. And then eventually you have the first customers implemented that are a little bit bigger and then they pay piecemeal. It's not like licensed software. They pay as they go, which was the intent of the entire business model. Now the flip side of that is that today demandware has, you know, long term contracts and more importantly the service is so Sticky. None of our customers would consider basically replatforming. As long as we do a good job, as long as we do what we promise. And as a result, we have excellent forward visibility in revenues and, well, I probably want to leave it at that. But the amount of money that might be needed for your business model is something that you need to think of about very early on. Okay, thank you.

So now you can tell why it's been so inspiring to work with Stephane. This is somebody who came from East Germany, had already been through multiple startups, found his way to the us had not only succeeded the first time, but then was smart enough to admit that even through his success, he'd seen seen a massive change that needed to not only cause him to start a business, but to leave an old business to figure out how to start it and once again move to the US and even without all those contacts, find his way to building a great team that has gone on to build a fantastic business. So it's a pleasure listening to you, but it's unfortunately hard for people to synthesize well, so what should be my career path? How should I find my way to do that? So I wanted to tackle that question because I get again asked it all the time, and what is the right career path for an entrepreneur or for a founder? Well, there are lots of examples of really interesting career paths. I've pulled out some that are sort of B2B. And of course, I left a classic most recent B2C one on here. And if you go through all of these founders backgrounds, you'll discover that there's no one story. In fact, the one thing that's really interesting about this is to look at how everybody has created a path similar to what you might hear from John or Stefan later on, which is their own, and for their own reason, they've created their own story that fits the opportunity. So I want to just hit this right on the head. There is no answer to this question. I get asked all the time following this, which is, well, should I go be in a big company and get experience from that, or should I do it at a startup? The only thing I can tell you is this, which is if you want to get startup experience, do it in a startup. So if you really want to, want to understand what it takes, you can't go and work for a big company even if they tell you, well, we've got intrapreneurship and innovation going on here. You've got to know what it means to be absolutely starting from scratch with no business card that has Google on it or something else, but all you have is your own wits about you. And so that's the one thing I will say, get startup experience if you want to understand what it looks like and feels like to be in a startup. Now, having said that, there are some fantastic books, one of which I love, Malcolm Gladwell's Outliers, that talk to how you might build experience. The so called 10,000 hours rule. If you spend 10,000 hours, three hours a day for a decade doing something, you're going to be capable of being the next Tiger woods or whatever it might be, the next Stephan Schambach. There is some real truth to that. A lot of the founders that we back, and you've heard me say this, have deep expertise. For example, the Salsify team that came through the class last year have been in the e commerce world and got their 10,000 hours of experience building companies like Endeavor and working with some of the key players in that space. The same would be true of Actifio Ash, who was in here to talk about value. Props, had built his first company, App iq, became the CTO of storage at hp, understood the pain of what was going on with the virtualized world and the cloud computing world before he started Actifio. And these are all companies we've backed. And of course you just heard the story from John. He built this company, SolidWorks, and then realized, just like Stephane, there's a major disruption here with cloud. Why couldn't we do it again in the cloud world with that as an opportunity? And so there's no question in my mind that that is a pattern. And it's certainly a pattern that's very easy for entrepreneurs to get backing for if you've got that unique expertise. But I also want to be very honest with you. Some of the greatest entrepreneurs are probably, probably sitting in this room and have absolutely no experience whatsoever. In fact, we've got one here tonight. Gail really did on the job training and built Constant Contact along the way. So, Gail, welcome. We're dying to hear your story.

Thank you. Excellent. Well, Michael actually asked me to do a TED Talk that I did. I guess it was about three months ago, so. And the theme of the TED Talk was founders can't scale. So I am. So I'm Gail Goodman. I'm the founder CEO of Constant Contact. Actually I joined a small tech team when we were pre product, pre revenue, pre funding, pre just about everything. So technically not exactly the founder. But for this talk, let's just, let's just call it the founder, when you run it on your credit cards, I think you get at least the little f founder. And today we are about. We did 285 million in revenue last year, have just shy of 600,000 customers. We serve the small business market and I'm also a first time CEO, which is I think kind of the theme here. Which basically means for the last 12 years I've kind of been winging it, but I've also been defying the odds because we all know, right, founders can't scale. So what do I mean by scale? Well, I mean really going from the stage where you are the team lead, you know everybody on the team, you know every project that you're working on and your fingerprints are all over everything, to the stage where there are people you don't know, projects you didn't kick off and things you actually can't be involved in because there's so much going on. And basically most VCs would tell you founders rarely navigate that path. And the data completely backs this up. So if you're thinking about starting a startup right now, the data says that in three years you will no longer be the CEO. Kind of harsh. By four years, that's down to 40%. If you're lucky enough to get to public, it's down to about 25%. And yet I bet you're all kind of right at this moment thinking, well, wait a minute, I know a lot of guys, guys who done this, right? You have the iconic names in your head of the folks who have done it. So what really did this little collection of folks have in common? Well, I'll throw one thing out there, little hard to replicate. So I'm not brilliant. I had to find a different way. And so I'm actually just going to go out on a limb and say there is a better way. It's ridiculously simple and unbelievably hard. Ready for it. You have to face yourself. You have to hold up a mirror to your leadership and be willing to be unbelievably ruthless about what's working and what's not working. Because as a business grows and changes, you will need to change not once or twice, but literally hundreds of times to face the different challenges and different stages that the business is going to go through. Because it needs different leadership at different moments. And you're going to have to face two really ugly truths. First, you're doing something wrong all the time. Not that comfortable a feeling. I'll talk about it in a minute. And the second, your flaws are actually harming the team kind of. Ouch, right? That's a little harsh. I put it so harshly because most founders, what made them so successful was their relentless confidence, their perseverance. I totally believe in the 99% perseverance. I think the single most successful characteristic I have is stubbornness, which means you're also probably a little less inclined to, to look inward. Let's just be honest. So let me dive into these two kind of tough, tough things. You're doing something wrong. What do I really mean? Well, I mean, you gotta think about the role you're playing because the role changes. So I'll share a personal story. Very early on at Constant Contact, it was all product market fit, right? Can we, you know, who's the customer? What problem are we solving? Can we get them to buy and open their wallets? And I was really the lead product manager. Well, my career path was through product management. So I was really comfortable. I dug in. I dug in deep. I was with the team. We were working it. We're testing things and trying it and measuring it, engagement scores and finding everything. And then we actually started to get some traction. And I stayed with the product team and I dug in and eventually one day our head of engineering invited me out to lunch. I thought we were going to have a little career chat about him. We sit down at lunch and he did one of the bravest things I've seen somebody do in a long time. He said, gail, you are driving the team nuts. You need to get out of our shorts. And he was totally right. I can't thank him enough because not only was I driving that team crazy, I was not spending time on our go to market strategy, which was really where the company needed my focus at that point. So by staying where I was comfortable, I was really robbing the team. I was doing the wrong thing. And it just literally turns out that one of the single most important investments you will make as a founder CEO is where you spend your time. And yet we tend not to think about it. We tend to be guided by the urgent, by the to do list that's in front of us, by the outlook calendar that confronts us in the morning, by the email flow that comes in. Instead of stepping back and being thoughtful about the single most important investment you have. Where do you spend your time on the business? And there are some things that can really help you. So one of the ways to do something right is again, to hold up this mirror. And I found a really great way to do it. It's my strongest Recommendation to anyone who's a founder, which is I got a CEO peer group. And I got one really early. I joined a group of folks, we were all about under 2 million in revenue, VC backed. So we had a lot in common. We were all Tech Founder CEOs. And one of the first things we did at every meeting and by the way, this cost time. So we actually met for a day and a half every quarter. Huge investment of time. When it was first proposed to me, I thought they were crazy. But one of the openings of each meeting was where did you spend your time last quarter? Where should you spend it next quarter? It forced you to step back and see the forest for the trees. Because I gotta tell you, if you go into this startup thing, you are gonna be in the trees. You're gonna be in the weeds every day, intensely busy and just having that opportunity to step back, whether it's with a CEO group, whether it's with your board, whether it's with whoever. The forest for the trees helps you understand where you need to be adjusting your time allocation. The second thing I did early that ended up being really smart was regular executive team off sites. Team off sites where we looked at what was going well in the business and what was not going well in the business. Flaming insight. When something's not going well in the business, it could probably use some of your time. And yet it wasn't necessarily true that I was spending my time there. So off sites where we were critically self grading the business and understanding where we had our biggest challenges to get to that next step of growth really helped me guide where I was going to set my priority and agenda for the next set. So when I talk about you're doing something wrong, I really mean be thoughtful about where you're spending your time in the business. Then that gets me to your, my second horrible truth. Your flaws are harming the team. Let's just be honest. We all have strengths and weaknesses. Some of you are young enough, you may not have been through enough performance reviews to actually have to know them so well. But I will say by the time you get to my age, you pretty much know them. You've pretty much heard them three or four times. I would also say you probably have a very well constructed self rationalization for why your weaknesses are really strengths. So I'll start with one of mine. I'm very impatient. In fact, it's my impatience that's driven this company every year to the next level. Right? That's, that's my rationalization. But truthfully, my Impatience has a dark side, and it has a dark side for the team. So one of the outcomes of my little impatience is I had actually created a little motion I would use when people were presenting to me. They were not going fast enough. I kind of did the get it moving signal. Honestly, I really let them know I got it right. Let them know that they could move on and get deeper into their presentation. Not right. Much hated symbol because it was actually harming the team. What was it doing? It was first saying, look, you put a lot of work into this presentation, but really, I'm bored. Move it along. Or your work isn't important enough for me to just listen and hear. It was also stifling conversation in the room. Right. Imagine if the CEO is doing this. Do you think the next person sitting next to me is going to ask a question? Good conversation. Conversation we probably needed to have. And then the final worst thing was that leaders stopped bringing their young up and coming talent to present to me because they didn't want him to get the symbol. So I stopped getting to work with and interact with our very best. Right. Heartache. So what does that mean? That means I needed to really be aware of how my flaws were harming the team and be willing to change. And the first step in awareness is knowing. So let me just say feedback is a gift. In the land of gifts, this is one most of us would rather give. Think about that for a minute. And as a leader in an organization, it sometimes gets really hard to get unfiltered feedback. We don't necessarily like giving difficult feedback to anybody and giving it to your boss even less interesting to most of us. And so you really do need to create a way to make sure you're getting feedback so you can grow and improve. Couple of little things we've done. Remember I talked about those off sites? Well, we would use an outside facilitator, and part of her preparatory process would be to go interview every member of my team. How's the business going? What are you worried about this, that the other. And then somewhere in there, she'd say, you know, how's it going with Gail? And ask a few clarifying questions to get me the feedback. So the first time she did this, she came in, she had a page and a half. I was unprepared for this. So I did what any good person would do. I completely shot the messenger. I totally yelled at her. And actually I went. I got angry at the team. How could they not get that these behaviors were the necessary outcome of the stress and strain of what we were building. How could they not understand that? And then I went home and cried. I was actually a little creeped out about even facing them the next day. How could they think that about me? And then I calmed down, and I realized that I had been actually given a gift. Right. Feedback is a gift. Without knowledge, you can't change. And so I calm down, and I now actually look forward to my feedback. Each year, I've learned not to do this anymore. So the secret really is, if you want to start a company and then grow with the company, you need to hold that mirror up to yourself, both to what you're doing and how you do it. Be willing to change and grow so that you can show the whole world that founders actually can scale. Thanks.

Well, if you're not inspired now, I'm not sure when you will be. And one of the things that was so important to me about bringing Gail up here tonight is that I've had some great feedback on this slide here, which is talking about the stages of a business. This slide was something that we put up in the funding strategy, and it was where we talked about the stages of ideation, confirmation of your idea, creation of your product, validation, et cetera. And so many students came up to me and said, well, that's great. I can go study all this stuff, and we'll go through all these pieces. And honestly, Gail's story is much more like the truth. First of all, do we really think that one size fits all in terms of the type of person that goes through all those stages? Well, as you've heard, the stats are not that. And it's a very rare person that can start off as the innovator, develop into the entrepreneur, to figure out how to turn the innovation into a business, then be a builder, and then ultimately an operator. That business at scale. That's why you see that curve drop from 100% founder to 25% at IPO, because those are very different qualities that it takes across the scale of these things. And just to remind you about what Gail just shared with you, she was constantly evolving, constantly changing, constantly developing skills, and it's a very, very tough thing to do. It doesn't mean to say you're a bad person, by the way, if you don't want to do that, There are some great people who are entrepreneurs who are still, like Stephane, heavily involved in the business, providing tremendous guidance, but they don't try to run it a lot down. At this end, it is a lot less fun. Yeah, absolutely. Well said. It is things get a lot more predictable and therefore, guess what, there's not that much opportunity to just whip things around and change your mind on the fly. So I put this up because for some of you who went through that class on funding strategies to go the distance, it's not just about raising the money to go through all of these different stages. For those of you who weren't here for it, you can find it@startupsecrets.com on this URL. It's also about evolving your business and that includes your team. And so what do we want to remember here? We want to remember that this is not just a business of investing in products and services, it's in investing in the team. And the one startup secret I want to share with you tonight above all is that you are actually your biggest investor. It's not about how much money you go and raise through every stage. Just think about this for a second. I'm lucky enough to write checks for people like John and Stefan. I missed Gail, but I won't miss her next time. What we don't do is what you do, and that is invest your life. When you make a decision to start a company, you are putting your life behind that. Now think about that for a second. That is a massive investment. It's a by far bigger investment than any check anybody writes for you. That is why this session is so important tonight. It's the introspection that you do, the looking in the mirror that Gail talks about that we're trying to encourage you to think about before you just jump in and create a cloud service. Because you can. That's not building a business, that's building a product. So to finalize this before we jump into our panel discussion, I'd really encourage you not to just set out to create a billion dollar company by finding an idea, but instead to set out to solve a billion dollar problem and to think about where in a mindful sense you're going to involve your talents, your skills and those of everybody else you bring along to build an enduring company. And the word that's key there is mindful. If we can do nothing else other than to get you to understand, to think about what it takes to build a company in the next 30 minutes when I interview Stephane and John and Gail, then I think we'll have achieved something tonight. So with that, please come join us and let's get into some questions here. Well, thank you all for joining us tonight. I actually think we should give you all a round of applause because it really was Terrific hearing it. Each of your stories. So you didn't answer a question you were about to go and talk to us about. What did it take at the point you said, I could tell you that later, John.

Well, I had a first company, the difference between liking and buying. So by the way, you learn as much from the companies that don't go as well in some ways more. I always think the best people I encounter in my career, entrepreneurs or salespeople or those who've seen both. So in my first company, we built a product. Everyone loved it, people gave us great feedback, but very few people bought it. And that really informed my thinking for building my second company. SolidWorks were those experiences and we get into why. But fundamentally people just weren't going to make room on their computer for this kind of application to buy it. It did some interesting things, but they didn't open the wallet and buy. And it was very hard. We did get some customers. Of course, some can be worse than zero because if you have zero customers, you know you're completely wrong. If you get a few, you're always thinking, well, I'm just that one little twist away from gold. And it wasn't there.

Stephane, let's jump on to you for a second. You shared with us how you were a young 20 something, 21, 22 year old starting a business. How did you know you were an entrepreneur or did you not even think about it? What was it that gave you that kind of guts to just start the company?

Well, I started my first company when I was 19 actually. And that was at the time I felt it was out of necessity a little bit. There was a special situation. The wall had just came down between East Germany and West Germany and everything was in turmoil. So at my university, nothing much was going on. And also my father had just died and I felt there was basically no. I needed money. And the next best thing that I could, next best thing that I could think of was to try to see if I can get a loan from someone and then start selling computers, shuttling them to my hometown from West Germany. And I somehow got this started and I rather liked it. And pretty, pretty soon we were in contract programming and system design and a couple other things. And I never looked back. I never finished my degree. The original plan was to finish my degree, but I just before that point I was very interested in technology, so I was always an electronics geek. Hardware, I would also do a little bit of software. But I never felt that I wanted to run a company. That really came, that appetite came with doing it, if that makes sense.

Yeah, it makes tons of sense. I'm not going to go to Gail just yet because I want to bring that question back to you. John, too, you had a similar sense of obviously wanting to start a company. What was it that led you to start SolidWorks in the early days?

Wow. Probably a lot of things. One was I had grown up with my father selling stamps on the weekends to collectors as a kind of side business. So I learned I just was part of a business growing up and watching him do that, that was his sideline. His regular career was as a lawyer. But that was very, very important. He told me a lot of lessons that came back. That was one thing. The other is want to make money, wanted to express ideas. You know, you start having ideas flowing through your head like many people in this room, and you just see, say it's the way I imagine some people turn to art or music. We turn to building. I want to build something. I'm an engineer. Engineers want to build things. I'd worked in a big company and seen that getting your ideas built can be very difficult in a bigger company. And then that sense of seeing the vision and maybe a sense of wanting to prove myself. I find a lot of entrepreneurs have some insecurities, and this is a way they say, hey, you know, I might have been a nerd in school, but I'm going to show you something here. You know, they all factor in and then opportunity. Sometimes it depends what else is going on in your life and what alternatives you have. Those all factored into my decision to start my first company premise.

It's great that you shared that. I think we're very lucky to have such an honest group here. It's honestly a lot of those factors, you know, whether it's a need to, you know, pay a bill or to sort of get yourself going, or in your case, to express ideas or prove you could really make a difference. That I often see in great entrepreneurs. Now, Gail, you took a huge risk in your career, effectively joining what was a small company at the stage that you joined it. And what was it that led you to believe that you could be a founder that would scale, that you could make this happen, that you could really break those barriers.

Well, to be honest, I got fired, so it wasn't as big a risk as it might have seemed. I had been at another e commerce startup that had imploded, and I was like the third round of executive. What do they tell you when you walk the plank? Whatever. I was the third one off the plank. As they lined us up one at a time every quarter, we missed another story for another panel. But it was also the time of great Internet expansion. So it was 98 going into 99. Everybody was becoming an Internet entrepreneur. And more importantly, this may be the ego thing. A bunch of people I had worked with were getting CEO gigs and 10 million in funding. I was like, damn it, I'm smarter than them. And so that combined with the fact that I really wasn't that good working for other people, so I'm just not. I always rubbed my bosses a little bit the wrong way because I was sort of confident in my own opinions and a little pigheaded. So the idea of not working for somebody else, being somebody else's was my management team's problem now. But at least it wasn't my boss's problem. So, you know, it wasn't like I had a great passion. I had always been five years old. I wanted to be an entrepreneur. It was sort of at the right time in my life where I had the confidence to do it. The window of opportunity, because I was unemployed, a lot of innovation happening, and I met the right kind of right team with the right idea.

So you've mentioned vision, and we often talk in this class about how entrepreneurs usually have at least a starting vision. Can we hear from each of you? We're going to start with you, Gail, and we'll come around. What was your vision for how you developed constant contact or bandware and so forth, and how has it evolved or how consistent has it stayed versus where you started?

So we definitely started the very simple idea at the beginning. It's really hard to cast yourself all the way back, but. But Amazon had just started sending out those personalized emails. If you liked X, you might like Y. And we believed that we could help small businesses stay connected to their customers with email marketing. And actually, the term email marketing didn't even exist at the time. There was no spam either. And we just really believed that we could help that small business really look like a big business online. So our first slide deck for VCs had the picture of the dog and the compute in front of the computer that said, on the Internet, nobody knows you're a dog. Ours was on the Internet. Nobody needs to know you're a small business. Right? We can make small businesses look like big businesses. And that was really our guiding vision at the beginning. Over time, we've really come to understand that we can actually change the success formula for small businesses. Half of small businesses fail in the first five years. And we believe we can literally change that statistic. And that's the vision that drives us today.

And so that stayed consistent or has it evolved?

It's gotten bigger.

That's a good sign.

Yeah, it's gotten bigger.

But you haven't lost the original premise of it though. That's the important thing. Now, Stephan, we had a little bit about your vision. Obviously I've heard the story, but it doesn't seem to be me, at least even sitting, as I hear today, like it really had to change that much. You had that vision from pretty much day one.

Well, you know, some things change. For example, it took some time until we figured out that we could really affect revenue growth. That wasn't so clear at the beginning. At the beginning, it was more like we found a model whereby we can make more money and have a better gross margin, our customer have a better technical experience. But we found out over time, oh my God, our customers are growing faster. Why is that? And then we systematically applied what we learned.

I have to say, I mean, the inside track here for a second is that this is an example of where entrepreneurship does make a difference, is that instead of just sticking to the premise of we're going to provide what is effectively a service for a compute capability, it became a business model innovation as well. Do you want to just talk a little bit about that?

Yes. I think that's key to our, to our success. We have normally an IT service provider has a conflict ridden relationship with its clients, right? Because the IT service provider just want to sell the service or the CD or whatever it is and then have as little work as possible with delivering it because everything else doesn't make much business sense. In our business model, it's the other way around. If our customers don't grow, we don't make enough revenue. If you can help them grow really, really well, our revenue is directly affected. This is the revenue share model. And IT allowed. Once we understood that actually what this can do, how powerful this is, I started to bring in people into the company who had actual merchandising experience. And I still remember the first day or the first week we had Harvey Bierman in the company who was a merchandiser. He also understood E commerce, but primarily he was a buyer. Right. And he had this abrasive retail culture. And immediately he was in fights with the engineers. And there were people coming to some of the best people came to me and said they wanted to come quit. So it was a culture shock to the organization which until that point was totally technical, but it was the right thing to do. It transformed the company to a point where even every engineer understands exactly what we're doing and what they can do to contribute to an even better experience for our customers.

So the takeaway from that, by the way, is on many fronts. Not only the business model being innovative, which we talk about in one of the sessions, but another thing that's really cool, which is we managed to bring the customer inside the company. And it's easy to talk about getting out the company and going into customers. Much harder to do what Stephane did, which was actually to figure out how to bring the merchants into the company and literally make them a part of the DNA to answer their needs. We have a question at the front.

I have a question regarding the. The picture that you had at the almost at the end going from innovator to operator. Yeah, I thought that was a great diagram. But in transitioning from an innovator to an operator, how does a CEO or founder balance the time to keep up with the technological changes, to be able to communicate with the A players who are obviously going to be very sophisticated and technologically savvy? So how does one manage the time between keeping on with the technology versus learning the management skills like marketing and finances and things like this?

Well, so I think it's a fantastic question that each of you is going to bring a dimension to John. You're living it, you've lived it and you actually made some specific decisions about what role you'd play. Can you talk a little bit about how you developed that?

Yeah. Well, I was CEO at the time we started SolidWorks and I stayed CEO until we were doing about $100 million a year. And which happened pretty quickly. Well, I guess it was eight years from founding in house, about five years of shipping product. And then, then for my final years at SolidWorks, I stepped down as CEO. I was a group executive, kind of an in house advisor. But when I was CEO, I used to think a lot about it because we were growing really quickly. So one of the things I felt was if you're still needed, your team isn't strong enough, you know, because next year you're doubling. I used to. You become quickly not just a manager, but a manager of managers. So you're trying to teach the managers how to manage, you know, and you tell them, hey, whatever group you're in, the other thing is, you know, everyone, everyone finds sweet spots. Even, you know, you, you, you evolve. But you say, where am I going to spend my time this quarter? You pick different areas. It might involve you. You realize that. I realized you're always trying to strike a balance between micromanagement being too hands off. You know, you don't want to just delegate everything, but you don't want to be micromanaging. I found setting the culture, culture becomes a guidepost for making decisions. My philosophy was always the best thing to happen is for all the decisions to be made at the lowest possible level of the company. And I would strive, you know, someone would say, sign this. I'd say, why am I signing this? Why don't you sign it? Well, I thought we'd have to get approval. Why don't you approve approval? And if you have that attitude, it propagates down. But it's tough. It's beyond the scope of. But these kinds of attitudes help. You have to be good about using your time and thinking about it. You have to be. Deciding what not to do is the hard thing. Deciding what to do is relatively easier. You have to keep a perspective view. Like Gail said, I think, you know, it's easy to get caught up in the to do lists and the schedules. And like I say, everyone has a home base or a sweet spot. So that's a little, that's a few minutes. It's a very interesting job and it can be a lonely job. So peer support is a great thing too. The other comment I have about management, one time people, someone asked me, in a company, how did you learn to be a manager? You were an engineer. I said, the thing is, I started my career as a low level engineer at a big company. A powerful lesson. The question in a lot of management decisions is not how do you learn to do it? The question is, how do you avoid forgetting the right way to do it? Because when you start out your career as the engineer looking up at the organization, you've never. You make some notes and you say, that sucks. And if I ever get to run things, it'll be different. Everyone, everyone work in a big company and feel that way about your management. So the secret is it's not how do you learn how to manage? How do you avoid forgetting that when you're in charge? And I used to think about that, I'd think, how did I sit in the audience of a company meeting? What was I thinking about? How did I want management to treat me? And I tried to remember that great lesson.

I have to say one thing before we missed the opportunity, it was fantastic to hear Gail talking about how she reevaluated herself at each stage and went back and looked at what did she have to change and in particular, where to spend your time. Because the thing she said is the thing that we see happen the most, and that is that the entrepreneur who becomes the operator quickly falls into the trap of doing what they normally find easiest. And that is usually the exactly wrong thing to do. You need to promote whoever it is that could do marketing or sales or whatever to do that job. So you are not doing it. So you have time to do what Gail said she did, which was to step back. Okay, so a culture point. We started to talk about culture. How important was culture, Stephane, in the development of the business? And then let's get some other perspectives too.

I think we started out very much engineering driven, and this change towards really focusing on the success of our customers was the hardest thing to do, I think, but also the most rewarding, I want to say. Other than that, I believe our culture is not very much different from that of other B2B cloud companies. That is what really makes as special, I would think.

And Gail, since you didn't bring culture up, you as a personality obviously have probably, like many leaders, driven a lot of the culture. Can you say what you believe your culture is and how important that has or has not been in the company?

Yeah, I'm not sure I buy the. I drove the culture. So let's leave that on the side for a moment. I would say our culture developed early around a couple of key concepts. One was just the fanatic focus on the customer. Right. We learned very early on that we are not our customer. Right. So when you're focused on the small business market, you know, 70% of our customers have 10 or less employees. Half of them have five or less. We are more tech savvy, more marketing savvy, more current than our customers are. So our judgment is poor in trying to decide whether our customers will get X or Y. You have to go talk to them. So that customer focus, understanding the customer, hearing from the customer, getting in front of the customer, and really defining our success by their success. So the other thing about monthly recurring revenue service is if they don't use it, they cancel. Pretty simple. So if we couldn't drive usage, repeat usage, continuous usage. Right. One of our whole things was cancel anytime. Well, cancel any time means you got to keep using it. So focus on the customer was a key thing. And then our second thing, which was just very crisp, very clear, and very simple, was no assholes. Right in the beginning, we actually had it up on the walls. Then we, like, cleaned it up I'm not sure why, but we knew that collaboration was important. We had all been in businesses very much. You start with the things you hated in the last company. Need to remember them where there were individuals who were. Who were difficult to work with and they were tolerated because they were rock stars. But that's really, really destructive to the team. And so that one individual might be great, but it may, you know, really dishearten a bunch of other individuals around them. So we just decided that we weren't going to allow that to happen. And those two became our anchors. And it was like, I don't know, like eight years before we wrote down our core values. Oh, oh. And the other was no corporate bullshit. So I remember having a huge debate at an Ernst and Young event between whether writing down our core values was a violation of our core values. And I basically said, I'm not going to write them down because we have no corporate bullshit, and core values are corporate bullshit. And then eventually my CEO group told me I was full of it. So we wrote them down.

So what's really funny is I might challenge you now, because when we were building companies, the cultural challenge was exactly the same. How do you create so culture without writing a rule? And so we always said, there are no rules, there are principles, and the principles stand out. But you clearly did have some principles before you let it go. You, therefore, as a leader, did hold people accountable to those things. Like, you clearly made customer success something that you valued, and you help people to that. Otherwise, it couldn't have played out. And the same thing with no assholes. I mean, frankly, that's a consistency that you decided you were going to enforce. So even though you say you didn't drive culture.

Yeah, okay, maybe you did. Okay.

All right, I'm going to make sure, again, there's no questions. Yep, we have one here.

So, Gil, you're very interesting because you talk about this CEO who's going like this and saying, don't, you know, be ruthless, like, right. At the same time, you're saying, don't be an asshole. Which sounds like maybe sometimes you are.

Fair enough.

You say, no bullshit. But, you know, sometimes it's. Maybe you are. But what probably makes you successful is, like, this balance of both of them.

Right.

And so I kind of got a feel of how you balance it out. You're very, like, retrospective, so forth. Right. But I'm interested to see both of you, to some degree, must be balancing these things also. And it's really important with who you hire, who you fire, how you Bring on new talent, you know, like how you set your culture and. And I think this balance of being an asshole, but being compassionate is really important. And I kind of want to hear how you guys do it in your.

So basically, John, are you a compassionate asshole?

Yeah. That's a really good way to put.

It, I can tell you. I had a phrase at SolidWorks, I mean, we wanted to be. We said some things. First of all, I wasn't a believer in writing stuff down. It's how you live and how you behave and what you say. And people figure it out over long term. If something you're saying is just some bullshit line for one company meeting or something, you're just saying, or it's something you live because they see you in a small company, they see you through hundreds of situations and it's a rough life. And you really get to know everybody over a year, two, three, four years. And they know what you stand for and they know what you care about. And we tried to do a lot of really good things. We cared about hiring. We said, every freaking company meeting, hiring is the most important thing you do. If you're not raising the bar, you know, if you're not hiring the people who are awesome, we won't have a great company tomorrow because we're a growth company. And we said that at five people, 50 and 500 people. And you know, and anyway, one thing we said though, we're going to be an asshole about one thing and that's buying our subscription service. We had a license business and we had a subscription annual subscription service. And we said, you know, if the customer is on subscription, they can freaking call me on my cell phone for support. You know what? I said that a lot of times, I never got one call. We had 2 million users. I would say that, you know, it was a way of speaking. We'll do anything for them. If you're not on subscription, you know, get out of my face, we're not talking to you. That was one thing. So, you know, you got to pick something. Because I noticed, guess what? Companies that were like that were good companies. And so you got to pick something that you're going to be tough about, but I think it's about how the other thing is cultural leadership doesn't correspond to organizational leadership. So Scott Harris, one of my co founders at SolidWorks, he was a cultural leader. Charlie Nockman, who was a low level software engineer, cultural leader. I used to keep in my mind a little org chart of who the cultural leaders were who had that kind of Capital. And when there was a rough transition to make, you kind of draw on those people, brief them in advance, let them set the tone by how they react to a management change, a product change, something like that.

So, Stefan, the one thing I noticed, which was wonderful actually, frankly made it easy to be a board member for you, was that you never ever let any of us get complacent about what was going on in the marketplace and what the challenges were. You were always the guy out there saying, yes, but we may be doing great now, but we got to think about this. Did you make that a part of the culture or is that just what we heard in the boardroom?

I would say this is a little bit me also. I really do worry about the future and I see things there and sometimes they're great and sometimes we need to change course in order to react to them.

And you're even like it.

Today, I should probably clarify again that I'm not in an operating role today. Today I'm chairman. We hired the CEO about four years ago to run the company in my first public company. I decided being an operating CEO for public company wasn't really what I wanted to do for a long time. But I think there's often a difference between people who are really good operators and people who are more sort of in the creative and the vision in the strategy and marketing side. The latter may not be the best operators, but the operators often don't see what's coming. And this is where teamwork is so important. You've got to have both.

Very well said. That's why I put that graph up and it's why I encourage you to be introspective or look in the mirror the way Gail was and make sure you identify who you are and what you really enjoy and don't give up on it. On the contrary, think about how can that be a strength and how can you complement it when you hire great people and with a consistent culture, bind people to get the best out of each other as opposed to get any kind of corporate bullshit in the middle of it. So thank you. Now again, any questions? We've got one at the back here.

Sorry, I just want to pick a follow up on a couple of those themes. And full disclosure, I work for Gail and she's not an asshole. But tying in like what it takes, you know, I've been in three venture backed companies and now constant contact. And people can't confuse the asshole rule with fear of being direct or the fear of giving feedback. Because the thing about the 10,000 hours that everybody always skips by is it's not 10,000 hours by yourself. It's 10,000 hours effectively coached by experts to teach you what's working and what's not, whether that's your customer or a real coach, if you're a golfer or something like that. And I think that the role of the CEO has to kind of treat as precious the most valuable commodity, which is time in the organization, that urgency. And I think that the day that they're afraid of giving feedback because they're worried about being an asshole, or they're afraid of being decisive because they think that somebody might be upset by it, I think that's the day they begin to feel fail. So there is a balance there. But I think that you have to make sure that if you're an entrepreneurial situation that you don't view those rough edges as people that are afraid of feedback and afraid of having a tough, hard conversation that needs to be had. So for whatever it's worth, Very well said.

So we've got a. You want to add to that in.

Any way just to echo that? I agree with what you said. And we used to kind of compare it. We'd get people coming from other companies and they'd say, we thought you were nice guys, but you argue so much. And we did. But you're always arguing about what's the right thing for the customer and the right thing for the business. And you got to make decisions. So these kind of touchy feely consensus places, and there's some of those, we've seen those aren't doing anyone any service decisions have to get made. People are going to argue and debate. But then it's. Than at the end of the day, it's kind of. By the way, it was an mit. It's part of the MIT culture. For those of us who have been at mit, it's very much like that you try to find. I used to say, what's the capital R? Right answer. It doesn't matter who thought of it. It doesn't matter who gets credit. And we'll argue like crazy to get to the right answer, but we won't do it in personal attacks. And we, you know, we'll do it with respect and dignity and speed.

Those are great values to be listening. Do you want to add anything?

No, just don't. Yeah, no, I completely agree. Right. We argue hard. We just don't make it personal.

By the way, I love the picture when John first showed it to me of the wall because I think it immediately identifies what good cultures look like too. Everybody being the same, that brick wall is not going to yield the capital R. Right answer. Because everybody's going to think the same. But by contrast, where every piece is fit with a different experience and somebody can bring something different to the picture and you can have a debate which is respectful, you can really build something different that's unique and strong as a result of all of the best experiences in a team. And that's what you see in these great companies.

We figured out pretty quickly that we are in bed with our customer for better or worse. This wasn't always easy, not always fun either, because it meant if they had a problem, we had had to solve it, even if it was 11 at night. And in particular, when it came to turning our customer needs into product features, I felt that we would be better off having some of our customers, people with our customers background, part of the team that then helped us to come to better decision, more point quicker decisions around what to build. And some of the first bigger pieces of software that we then added, they had the desired effect of actually growing revenue. And once we knew that, that this was not an outlier with one client, but it was sort of, there was a consistency to it, we kept investing in it systematically. Unlike traditional, more technology focused companies. We have a group that's called Retail Practice that is actually quite big. I think it's about 40 people or so. And they provide consulting services and advice to how to use our cloud service best for free. It was tough to do this internally because it was hard to measure. I mean, instinctively we knew we do this, it should affect gross merchandise value and it should trickle down through the fees. But you could never put. You couldn't measure it exactly. You could measure it somewhat, but not exactly. But it was one of the best investments we made.

I think I remember the debate at the boardroom well. But it was a brilliant decision. It really was. And hats off to you.

I just wanted to follow up on this conversation, you know, having these intense, passionate, respectful discussions within the company. But I think beyond that, then there must be a secret to, you know, what do you do in these situations where you've got your VP engineering is just dug in on this one issue and then the VP of marketing's dug in. I mean, there's got to be a lot of nuances. I mean, how do you get all those people then marching in the same direction? If you have these passionate discussions and people, it could be two or three different camps inside. So I'd love To get some thoughts on that.

John, do you want to start off?

All right? The image that comes to mind is the concept of leadership capital. So I always look at. When you're running an organization, you build up leadership capital. It's like some form of capital. You get your nodding head, some of you get this. And then there's times where you draw on that account. You say to people, okay, we've heard everything. This is the way it's going to go. And, you know, CEOs have to do that. And the expectation and culture of the organization is that it's not always going to go the way the person wants. You know, it may not even go the way you want as CEO, but you got to pick the right way. And then you're relying on people. You know, it's just. You can't just walk in all of a sudden and lead people to greatness. You have to build that up day in, day out. How they watch you and how you behave and how you make decisions and how you treat people. And then when the day comes and there's something tough, you say, you gotta make the decision, though. You can't have fighting forever. You make a decision, you let people know. And if you have the right organization, the right culture, and the right personal examples, I think people will line up behind you and get the job done.

Did you lose a lot of people over experience? I mean, occasionally it can be the vice. You're going to lose people, but you just say it's for the better.

My experience is people who worry about losing people. That fear is highly overrated. I can recall specific. That's one of my favorite. You know, people always say, well, you know, half the team in this office is going to leave if you make that decision. And you know what I've learned? It's, you know, you lose, maybe you lose a small number, but those fears are usually overrated.

Sometimes it helps instead of fighting many battles to really focus on agreeing on vision, strategy, values, and things like this as a management team. And do it systematically and take the time, because afterwards everything else is so much clearer and easier.

I was going to say exactly the same thing. If you have great strategic alignment, have the battles at the top of the strategy pyramid, you have less battles in the middle. And so one of the best practices we've evolved is just a regular review of our strategy, mission, vision, where we play, who we serve, and how we win. It's kind of the fundamentals. The beginning. We just used good to great. We did our hedgehog. That was Enough. Right. So for like, six years, all we had was our hedgehog, but our hedgehog informed. Anyone know what I'm talking about? Yeah. Okay. It's one of the better business strategy books. And the Hedgehog is the intersection of three circles. What you're passionate about, what's your economic driver, and what you can be world best at. It's just one form of strategy. There's a million books. That one was good for us at the beginning, lasted for like eight years, and then we got fancier. But, you know, when you drive a lot of alignment that way, a bunch of the other decisions become much more straightforward. But you also have a shared passion. And which technology platform doesn't matter if you're making the world safe for small business. Right. I mean, if you have a shared vision on other things, some of these incremental decisions that feel like big swing votes get a little less big before.

You start a company. Every entrepreneur here or budding entrepreneur wants to know, what should they be thinking about? What should they prepare? How should they be checking, whether they're ready, whether it's right for them? And some of this I know, is stuff we've talked about already this evening, but let's just get that on the table. Gail, let's come around.

I think you've talked about a lot of it today. Passion, willingness to invest your time, recognition that it's actually a hard journey, not an easy one.

Great.

Yeah. I think an element was already mentioned here is I could never imagine being in just an ordinary job, being told what to do. This is a strong motivator if you feel like that. I think you have like, 50% of what it takes to come in, actually.

It's funny, I often say that I was unemployable, which is true as a. So I became an entrepreneur.

John, you know, I think everything's hard and everything's risky. You know, we're past the era of safe jobs, and I don't know anyone who's got an easy job because they're in a big company. And. But you have to, you know, I think you have to be prepared for long term. You have to be prepared for ups and downs. It's very few people that have all, you know, to your. And your partner, your family has to be prepared. Those around you, you have to be prepared. In my case, my wife, my children, everyone has to be supporting you.

Great. So the second question I get asked a lot is sort of, what are some of the key pitfalls that people should be looking out for? Entrepreneurs and Innovators should be looking out for as they're growing their business, as they're starting to develop, as it's moving through these stages.

Probably, I would say at the beginning there's all the obvious things, but the one is, are people going to buy? We've talked about it several times. You know where my, my thinking is. As you get larger, it's easy to think that you've conquered your mission when you're only 10% of the way along it, when you're a hot company or you've gone public or you've sold it. So then it's good to bring in data to help guide you. Like a pilot who's flying a big plane uses instruments to tell where they are. You got to set up the right instrumentation in your business, and that's something so you know where you are on a bigger, bigger scale, a bigger journey. Conquering markets.

I think some of the toughest but also most rewarding exercises is to really understand that strategy is differentiation and to take the time and really put the differentiated strategy together. There are too many entrepreneurs who come up with something that seems to develop early traction. But there are 10 other companies who are basically already doing this. This will never become something big. And this combination of big pain, a big market, and a differentiated offering and strategy is very hard to find. And to me, that's what's most often overlooked, despite there being great good teams trying it. Very good.

Agreed. With all of the panelists, I'll add. One of the pitfalls I think is kind of technology in search of a use case. So I often talk to entrepreneurs who've found a way to solve this technological problem. My question, next question is, what's the use case and is that a use case that is painful enough to people that they will actually change behavior? So most technology products are seeking to change people's behavior rather than doing it the way you do it. Now I need you to do it a different way. And there's actually a bigger psychological hurdle to change behavior than you might think. So do you have a use case and are you solving a painful enough problem that you can actually change either consumer or business behavior? I think a pitfall is thinking because you've solved a technical problem, you've solved a use case problem.

So for those of you in the startup secrets lingo, we talk a lot about this in what we call the Value Prop session. We talk about gain pain and having a gain that's big enough to overcome the pain of adoption and trying to find non disruptive Disruptions. If you want to go learn more about that, I thank you for bringing that up. It's a very, very key point. Point. Okay, so the last question for everybody before we wrap this evening is a simple one to ask and a hard one to reflect on. Gail, you're the only one of the three here who hasn't yet gone off and done it again. Would you do it again? And if so, what would you take away as the learning from the first time? The one single biggest learning?

So if the question is, knowing what I know now, would I do it again? Absolutely. If the question is, do I think I have it in me to do another one? I'm not done with the one I'm at yet.

Good.

And so it is very hard for me to imagine that. It is also very hard for me to imagine retirement. So, goodness, who knows?

And just to add the one question that I want you to follow on with, both of you, which is, so what would you take away from this first experience? And when you started again, you'd say, was your biggest learning to take forward.

With you how important the team is? Right. Team. Work with people you just adore being with, who challenge you, who make you grow, not who agree with you, but who you really enjoy. You're gonna spend an incredible amount of time, particularly at the startup phase, with a very small group of people, you know, And I will always look back, I stumbled on a fantastic, cohesive set of folks that I will love for the rest of my life. I just got lucky. I would be much smarter the next time.

Mr. San Jose. I mean, as a tech entrepreneur and some of you are planning this career these days, you are by definition, a serial entrepreneur, because these companies last, say, seven to 10 years before there's an event, let's say an acquisition or you exit, whatever it is. So you automatically have multiple companies in front of you. And for me, the biggest challenge is that I always put myself under pressure that the next thing I'm doing has got to be at least as good as the thing that I've done before. And that is what it is. Really tough. It is really tough. This is basically my biggest, Personally, my biggest challenge in thinking about building something again.

Well, I, of course, have done it again a couple of times now, and.

Thank goodness you do. Otherwise you'll have no job.

Yeah. One thing I'd say is to realize that. That we don't create opportunity. Like, first of all, I want to make a plug for staying with your company. I stayed 18 years at SolidWorks. I stayed 14 years after we were acquired. So people say. People always say to me, when are you leaving? What's going on? I mean, you know, it's funny. When I started the company, my mission was about bringing 3D modeling, 3D CAD software to every engineer's desktop. And I said, that's the mission. You know, that's what I'm doing. And your next. The opportunity for a company comes along. Stephan alluded to this earlier. You can't just sit there and say, now's the time for this market to change. You're usually surfing a wave. So, you know, watch for the wave and time it right. You know, not too early, too late. Whether it's. In our case, cloud computing somewhat affects all of us. The Internet, we didn't make the Internet. We didn't make cloud computing. I didn't make. In my current venture. I didn't make the conditions. I recognized them. I didn't run around every year for the past 15 years and say, I need to start a new CAD company. I watched things happening in the market, in the technology, and said, now is the right time. So too often we try to say. I've heard many people say to me, well, next September, I'll start my next company. Well, how do they know that the wave is coming in then? You know, so timing, you know, you got to wait sometimes for everything to be the right moment to strike.

Very good. Have we given you time to think?

I would probably pick the same topic. I mean, timing is enormously. I mean, you can take everything you learn in business schools, but this timing thing, nobody can. You have to. The entrepreneur has to decide what that is and when that is. And if you're right about this, still, things can. Can go wrong. But you have a much more resilient strategy and much more resilient company. If you're wrong about this, you can do everything else right, and it's not going to work.

So thank you very, very much to Stephane, to Gail, and to John for joining us this evening. If you take away nothing else from tonight, I hope it's one word, and that is mindful. Because I think the biggest challenge to being an entrepreneur is to be mindful of all the many different opportunities as well as challenges that exist to go out and build the kind of great companies that you've enjoyed hearing about tonight. So thank you very much, all three of you. It's been absolutely great.