Hyperscaling At Scale with PagerDuty's CEO, Jennifer Tejada | SaaStr Software Community

A typical retailer, a minute of disruption costs them $200,000. It's impossible for humans to navigate large, complex organizations when time is their greatest enemy. Teams across the globe need to engage quickly to solve problems when seconds matter. Time is money. Any relationship in a business starts with trust. Our customers started using PagerDuty for other mission-critical work, security, Security, finance, customer service. More than 560 integrations, endless use cases. Work in Jira? Awesome. Jira Ops? Terrific. Zendesk? No problem. CloudWatch, Slack, Salesforce. Today we drive the digital operations of more than 60 of the Fortune 100 and over 40% of the Fortune 500. We want to help you shift your teams from being reactive to being proactive, predictive, and even preventative. Every Every day, every hour can present a moment of truth for your teams where decisions you make in a microsecond can have a far-reaching impact. A gritty person will say, "Damn it, I am gonna make tomorrow a better day." I resolve that tomorrow will be a better day. Gritty people own their own destiny. When we think about growth as a value, we think about never resting, never settling. Good is not good enough. And we think that way in service to you.

Good morning, good morning, good morning. Welcome everyone.

Hi there, how are you? I'm great, thank you. How are you? Great to be back at SASTR.

Love SASTR. Uh, good to see you all this morning. Honored to be here with all of you, and mostly an honor to be here with one of my absolute favorite CEOs in the entire world, Jennifer Tjada.

Thank you so much, Samir. Appreciate you joining me.

I have long admired, uh, Jen's work as a SaaS CEO, um, not just because she's an exceptional, um, CEO and business leader, uh, but I also love the way in which she leads, uh, and who she is and what she stands for. I know has been an inspiration to me, and, uh, I'm very sure many others in our industry. And so, uh, when she asked me to join the PagerDuty, uh, board, which is an incredible group, a couple years ago, I jumped at the chance, just like I jumped at the chance to come join her here today to share some thoughts on this fireside. So quick intro on me. My name is Samir Dalakia. I've been fortunate to enjoy a 25-year career in this great software industry that we all get to work in. Most recently, I had the privilege of serving as the CEO of a company named SendGrid from 2014 to 2019. We took our little startup from $30 million through an IPO back in 2017, and ultimately an acquisition by Twilio in 2019 for $3 billion. Which was a great outcome and a great team to then join hands with. And then we worked on scaling Twilio past well north of a billion of ARR, and that was great fun. And ever since last summer, I've been enjoying a lovely sabbatical, which has been—

Jealous.

Terrific.

So I currently—

Very jealous. I currently sit on the board at PagerDuty. I recently joined the board at ServiceTitan, and do a bunch of nonprofit work as well, including pagerduty.org, which we will talk about. Later this morning. So that's me in a nutshell. Jen?

Well, I'm just thrilled to be here. I'm Jen Tejada. This, I think, is my 6th SaaStr, maybe. I've been indoors, I've been outdoors, I've been in the city, and now here in San Mateo. I'm just thrilled to see all of you, and excited to talk about the PagerDuty story, and what life's been like leading into our IPO, and in the last 2 and a half years since we took the company public.

Fantastic. And that's, I mean, there's such an incredible, it's been an incredible year of IPOs. Already, and I don't think I've ever seen in my, in my time in this industry a pipeline as robust of IPO-worthy companies. And so I'm sure there are lots of people out there listening, uh, that will learn, glean lots of insights from, from the lessons you've had, uh, building this great company at PagerDuty. So let's start off. Um, so you joined in 2016 at PagerDuty when it was just a wee bit smaller than it is now, and, um, and then less than 3 years later in 2019, um, the company went public. So Jen, maybe talk the audience through a little bit of how did you know that was the right time?

How did you think about that? Yeah, I mean, you're always making a pretty big bet when you think about the timing to go public. I think it's really important is to understand why. What are your reasons for taking a company public? Because the crossover into the public market is not an easy one. And people tend to focus on getting ready and all of the compliance readiness, the activities that you need to do. But at the end of the day, you have to think about what is it going to mean for us to be a public company, what's going to change? And will those changes be positive, and will they help you to scale? Or will those changes get in your way? And for us, we had been working to make the transition from really winning in the SMB and the mid-market and startups and computer software internet segments and wanting to move into large enterprise and had a great early lead in our efforts there. But we really felt like we were quite well known with the developer community, but not so well known in central IT in the Fortune 100 and the Fortune 500. So a big part of why we went public in 2019 was really to demonstrate to the market that we were a viable long-term platform that could support large— largest enterprises in the world, the greatest brands around the globe in their digital transformation. And that proved to be a great thesis. I mean, that going public really has helped to put PagerDuty on the map with the executive community, with business leaders, with CIOs, as well as the developer community. Community.

Yeah, it makes sense. So a clear why driving it. In, in PagerDuty's case, for SendGrid, I remember it was we wanted to do some M&A and we needed the equity capital. But having a very clear and driving reason as to why.

And that's a really good point. I mean, we did our first acquisition last year with Rundeck, uh, and, you know, the Rundeck team is well integrated into our business. They're a phenomenal founding team. It's a phenomenal startup. But what's great is they're actually excited about the next stage of growth. And, you know, going public is not always easy. You can't plan for everything. This was the morning that we went public where Pagey, our mascot, video bombed me on CNBC. So Pagey became a meme as a part of our IPO as well. It was a lot of fun. One of the Fortune journalists actually wrote an article about Pagey, and Pagey now has their own reputation to manage.

Isn't that awesome? Yeah. And it is fun, and you want to celebrate the moment. I know you also talk a lot about team and making sure you've got the right team in place as you think about that transition. Maybe a few words on that.

Sure. I mean, I think the IPO is a really important milestone, and sometimes in Silicon Valley we treat it more like an exit, but it's only an exit for your private investors. It's a really important milestone for the company. And for us, having a large team with us on the day to sort of celebrate the victory lap of, you know, being one of the small percentage of startups that ever makes it into the public market was super important. So in that crowd there, in front of the banner unfurling were several customers, partners, advisors to PagerDuty who helped us succeed at that level. But we also on that day and at the party celebrating that night talked about our next set of milestones, winning an enterprise and more recently becoming a billion-dollar revenue SaaS company. And that, you know, again, low percentage achievement for most startups. So it's a big goal. It's an audacious goal. But my point here is it's super important to make sure that once you get through that public crossover, that you're still setting those milestones, setting those audacious goals that get people excited, that inspire them to do their best work, to build great products and services and stay focused kind of on the long game.

Yeah, yeah. No, that makes perfect sense. And I know like right now there are a lot of people out there listening in that are dealing with the Great Resignation of 2021. And all the things you just described are super important as painting that vision to make sure that you retain and keep these, these folks motivated. What was it like as, as you were going through the IPO trying to get to re-rally the troops in that sense?

Yeah, well, it's interesting because it's a pretty exhausting journey. I mean, back in the day when we went public 2.5 years ago, you actually went on the road and met with investors for 2 weeks. And that in and of itself is a big job. And then, you know, you had the celebration, your first day of trading, etc. And then we decided that it was really important to bring our entire, entire global community into this process. So Catherine, my chief of staff, who's here today, and I and a number of executives, we went on a worldwide tour and hit every one of our offices to celebrate with our team members, but also to talk about recommitting to the next stage of growth and how important it was going to be for our leaders to help develop the culture. Because oftentimes people will ask me, well, how did you protect the culture as you scaled? And it's actually not about protecting the culture. It's about developing the culture. Building the culture that you need for the future on the strong foundation that you had as a startup, as a smaller company. And you can't do that one-to-one. You can't meet with every of your employees when you get into the hundreds and in the thousands, you have to be able to demonstrate that culture through everything you do. But even the effort of just making the trip around the world, falling asleep in black cabs in between customer meetings in London was worth it just to demonstrate to our employee base how important they were to us and how important this was as a milestone for the company. But more important, what we were looking forward to. And the job that we had to do to demonstrate to our new investors and our shareholders that we were a business that was going to create a long-term legacy for our customers, our partners, and our investors.

Yeah. No, and I love that notion that like for the public investors just joining you on that journey, it's day one for them.

Yes.

You're there with your team celebrating usually 6, 7, 8 years of hard work to get there, but you're just getting started and they're like, okay, great. Let's— what are you going to do for me? You know?

Yeah. What are you doing for me lately? Lately? Let's see how this quarter looks.

Yeah. The next quarter. The next quarter. And that clearly, you know, we've talked before about how critical it is before you're going out, you know, the old envelope test in the drawer. Can you, can you forecast every quarter you're putting the envelopes in the drawer and pulling them out on your revenue line, your profitability line? How closely can you predict that? You can't be more than a little bit off.

So to make sure that you're ready and I remember talking to you in a bar at re:Invent in Vegas after you had gone public. And you were saying, like, Jen, if you're thinking about this, make sure you've got the next 6 quarters lined up, right? Because it's not enough to meet your guidance. You have to beat your guidance and you have to raise and you have to have not only great instrumentation on your pipeline and confidence in your leadership, but you also have to have really strong fidelity in how you think those teams are going to perform and your ability to actually overdeliver, not just underdeliver. You have to know your business well enough to be able to forecast with enough room. I always say sandbag appropriately. Yeah. You know, I remember another CEO, I said, so, you know, coming up on my IPO, like, what do I need to know about my first quarter reporting? And he said, lowest believable number. Put out the lowest believable number. That's harder than you think it is, right? Because you want it to be realistic, but your investors want you to deliver —frothy growth rates. And so there's also a lot of work to do in the narrative to help your investors understand the story and understand the puts and takes and also, you know, gain and develop confidence over the long term around what your business is going to look like.

Yeah, absolutely. And, you know, obviously for those of you that are looking at this, there's a huge opportunity as you're recruiting these, these team members. For the next leg of the journey, the next leg of the steep climb, reinforcing the— there's so much more value that gets created after the IPO. And to Jen's point, it's always thought of as this end destination, this exit event. But, but gosh, once you, once you start compounding revenue numbers north of $100 million in ARR at 30%, 40%, 50% year over year, what took you 8 years to get to the first billion will take you 12 months to get to the next billion.

Absolutely. And you have to manage employee sentiment through that process because, I mean, one of the things that you learn after an IPO is everybody is checking the stock price on a daily basis. And I remember our first all hands after IPO. I noticed that some of our employees seem to be spending more money on personal goods and personal items, jewelry, belt, shoes than they had before. And I remember saying to them, do not watch that stock price every day because On a day when your stock's up 10%, that doesn't mean you were 10% smarter or 10% better. And the day your stock's down 10%, it doesn't mean you were 10% more stupid than the day before. And you shouldn't be writing checks that you don't know if you can cash. It's really about focusing on the long game, on long-term shareholder return. And that's a hard thing for employees who have just gone through this process to grasp. So we really started to focus on the key factors that would demonstrate the durability of our growth.

Yeah, I was going to ask you to talk a little bit about that. I know in the last few earnings calls, Investor Day, we've been talking about how you anticipate the needs of customers and even of whole new markets so that we have multiple engines of growth as we scale well past IPO. Maybe a few words on that.

Yeah, well, one of the things that was really interesting is as we were going through planning for the IPO was thinking about how do you get to know public company investors and help them get to know not only your business, but your leadership team. Because public company investors are not just looking at the numbers. They're looking at who you are as a leader, how deep is your leadership bench, you know, what is your track record for success, how convicted are you around your mission and your vision, can you really be disruptive, et cetera. And so we did not need the cash, but we raised a Series D about, about, you know, 6, 8 months before we went public in order to test our story and our narrative and our performance out in front of a number of what we now call crossover investors. And T. Rowe Price was one of the firms that led our Series D along with Wellington. I remember sitting down with Henry, who at the time was leading the growth fund at T. Rowe. He now has his own fund called Durable, actually. Incredible investor.

Maybe advance to that next slide.

Yeah, phenomenal investor. And Henry took me to school on, you know, what it means to demonstrate the durability of your future growth beyond just trying to get the investor community to take your word for it. Yeah. And so we really used the opportunity in working with Henry Ellenbogen to define and really articulate what were the multiple drivers for growth in our business. And how— and give people a picture of how they might play out long term. And for us, those drivers were making that transition from a phenomenal popular single product to a multi-product platform and demonstrating that we could do that. Also demonstrating that we could be successful in launching and performing and winning in new markets. So at the time, we had laid the groundwork to really build a strong presence in EMEA, and that has served us very well from a growth engine standpoint. Also showing the platform-esque nature of PagerDuty and the fact that not only developers, but IT organizations, security teams, increasingly customer success and customer service teams could leverage PagerDuty for use cases they imagined, where the common theme was that you're going to see more and more work that is unpredictable, unstructured, time-critical, and mission-critical, and that none of the other workflow platforms that came before PagerDuty could solve those types of problems efficiently, effectively, and in a way that users really liked and were able to use quickly. So maintaining a really intuitive user application on top of, you know, a more complex platform was going to be really important for us. And then finally, like, testing ourselves and our own mettle with the largest enterprises in the world. And PagerDuty now serves more than 65 of the Fortune 100. And more than 45% of the Fortune 500. And these are the biggest and best brands in the world who over the last couple of years have gone through phenomenal digital acceleration. Right. And so in some ways, that's helped the market meet us because one of the challenges that PagerDuty has had is we're out in front of the market kind of demonstrating a new way to do work. And not everybody transitions in their operational maturity at the same rate. And so, you know, the pandemic and the past you know, several months in the market have really created an interesting opportunity for our customers to recognize that digital is the way business is getting done. Digital is the way consumers are engaging with their brand. Everybody is online and on demand, and that's no longer the sort of side business or the secondary business. That is the primary way that these companies, the brands that we serve, are building out their own growth and their revenue and their brands over time. And that's meant this very quick shift to how do I make sure all the digital kit in my business works? How do I build digital assets that create a delightful experience in the few seconds a consumer or a user will give me to make everything work perfectly? And that's where digital operations and more broadly real-time ops has become super important. And customers have started to rely on us for more of a strategic partnership as opposed to simply improving the way they manage incidents and respond to incidents.

Yeah, which is incredible. You know, the pandemic has been such an incredible tailwind in many ways for this transformation and therefore for the usage of PagerDuty across businesses of all size. I've been, as a board member, just so amazed at all the use cases outside of the traditional IT use case. That is what I used it at as a customer at SendGrid. We loved PagerDuty. Our team loves PagerDuty, but we use it in, in our engineering teams and DevOps and so on. But then to hear about all these other use cases, and security and customer service and customer support, et cetera, that those engines of growth, they just keep going. It is a real platform. Totally.

One of the things one of my customers helped me realize is that one of the huge business value propositions for PagerDuty is it helps teams operationalize the trust they're trying to build with their own customers, as opposed to depend on a really complex ecosystem to just work perfectly all the time, which we know We know that software is imperfect. We know that integrations are imperfect. Even APIs are imperfect. And so if you just rely on that software to run perfectly all the time, you're, you're going to mess up with your customers. And so that operationalization of trust really has become a mission for us in many ways. And some of the use cases that we hear about are really fun. I mean, and really interesting. We have a nonprofit that leverages PagerDuty to manage corneal transplants. Transplants. And, you know, really, like, talk about a time-sensitive, mission-critical workflow. A cornea becomes available by a donor, and you have, you know, less than a few days that that cornea will be viable when it can be transplanted into a new recipient. And so they use PagerDuty to manage all the organizations that are part of, you know, taking that cornea, getting it to where it needs to go, transplanting it effectively in a patient, and aftercare. And that That to us is a really fulfilling way to see our platform go to work. But it only— we only learned about it because the customer told us about it. Yeah. And we certainly didn't design the software to do that. But it really speaks to sort of the broad applicability of what we do and also the way the world is going. And one of the other lessons that I learned in this process was when you're getting ready to go public, you know, the banks help you, your advisors help you, your investor relations people, your product team. They help you build out this narrative. And, you know, one of the things you talk about in your narrative are what are the tailwinds that are going to support the durability of PagerDuty's growth. And the interesting thing is, you know, you share these tailwinds and while you sure hope that they are long-term tailwinds and they continue because you're going to be around in the public market every quarter and be asked to demonstrate that those tailwinds you talked about when we took that allocation and gave you our money actually came to fruition. And it's interesting, the tailwinds we talked about then are the tailwinds we still talk about now. Cloud adoption and cloud migration, DevOps transformation, what we used to call digital transformation, which is now digital acceleration. And even more recently, to your earlier point, this, the great migration of employees, because when a PagerDuty employee leaves one company and goes to another, they take PagerDuty with them. Word of mouth has always been Good for us. So we actually see this, this massive change in employee mobility as a potential tailwind for PagerDuty as well. But you better be ready to stand behind those tailwinds when you come up with them.

Well, thankfully, we've— you've chosen wisely with the tailwinds. Digital transformation, real-time work, those are all things that are not going anywhere anytime soon. They're just accelerating. So quickly, a few other questions here on leadership team evolving. As you think about going through the IPO and scaling post that. Any quick thoughts on how you think about succession planning or things that— where you spend your time versus post-IPO that may be different than pre?

I once had a CEO tell me that he didn't like working with people, and I remember saying to him quite directly, then I think you're in the wrong job because your job as a CEO is to identify the talent that you need, not just today, But the talent that you're going to need for the unforeseen challenges and opportunities in front of you over the next couple of years and also to develop those people, to put those people in a position to succeed, to empower those people to do their jobs well. And I got feedback in a 360-degree effort with my board about 3 years ago, and one of the things they said is, Jen, there's a lot of things across this business that you've done before that you're able to do. Been in that job, you can make those happen. But there's a few things that only the CEO can do. And that is where you have to focus your time. So figure out what those things are. What are the things that only a CEO can do? And make sure that you're investing on those things, you're investing your time in those things, and you're empowering others to do their jobs really well. That you're coaching others on how they can effectively lead the organization as the organization changes and grows. And one of the challenges of being a CEO in a high-growth company is every now and then you have an executive that kind of hits their sort of limit and you need something different. And you have to have that tough conversation of either leveling that person or helping that person transition to a different chapter in their career. And that's hard, but it is necessary and critical. And yeah, and typically good for them too, and often good for them if you don't wait too long. Yeah, like There's an old saying like, I never let anyone go too early. I'd also just say that having a deep bench really matters. Like oftentimes we hire these great people. We get excited about them because they're new, they're experienced. You know, when you're a public company CEO, they're often more experienced than you at their job. And you forget to remind them that it's their job to build a very deep bench. What if they get hit by the lottery bus, you know, next week? What if you need to make some changes? You want to have people lined up in the dugout ready to take on the next job. And that is so much more important in the public market because the market's not going to give you grace if you have an open role or a leadership gap that you can't manage. And as a CEO, you don't have time to do everybody else's job on the team, right? Absolutely. And it's hard to ask other leaders to take up the slack because they've got their own challenges and their own opportunities that they're prosecuting.

Yeah, well, I love that theme around And then there's probably nothing more gratifying. Well, there are a few things that are as gratifying as a CEO of developing people, working with your team, seeing those folks grow in their careers and tackle the next set of challenges. There is one that's close, which is seeing your business become a force for good. And I think increasingly, you know, leaders are judged, as we see all the time, on the human-centric side of leadership. Now, in this day and age, more as as much as on their delivery of the business performance and the results. It's very different than it was 5, 10, 20 years ago. How does— and you have been such an incredible leader in this space. Talk a little bit about how that influences your focus on social impact at PagerDuty and some of the things we've done.

Well, I, like a lot of young people in my 20s, went to my CEO at the time and quit my job because I wanted to start a nonprofit. And I'm sure he had seen this like 100 times before because he seemed very well prepared for, you know, my big speech about how I want to change the world and have a bigger impact, et cetera. And he said, Jen, that is admirable and I really appreciate that, but if you leverage the scale of our company to change the world, you have a much better shot at making a meaningful impact than if you try and do it as one person. And I thought, that's actually a pretty good point. Compelling argument. Compelling argument. And that was a company called i2 back in the early days of supply chain automation and software. And when we went public, we built a foundation through donations from employees that allowed iTWO to invest in non-for-profit activities and, and try and build their social impact. I think Marc Benioff has done such an incredible job of setting the pace for other leaders around not just your corporate responsibility and your business responsibility, but your social responsibility as a leader. And he has a saying that all leaders should do well and do good. And that led to the 1% Pledge, which, you know, Salesforce initiated, where Samir and I are now on the advisory board and the CEO Champions for 1%. But if you haven't thought about it as a leader in your company, you're essentially committing 1% of your equity, 1% of your product, 1% of your people's time to serving the communities around you. And when you do that before you go public, That then funds tens of millions of dollars, in some cases hundreds of millions of dollars. For us, it was the birth of pagerduty.org, which now serves time-critical global health issues and just and equitable communities around us. Because I really believe that not only that should the tech industry be more equitable and more diverse, but the world around us shouldn't. It's our job to help drive that transformation. I think what people miss about this opportunity is how important and valuable it can be in driving your purpose and connecting your employees to a broader purpose that is bigger than just what your products and services do for your customers. Absolutely. And for us, I mean, this is an area where we get very high engagement scores, where our employees participate actively, not just in volunteering their time, but also their services and their expertise. And it's become part of the PagerDuty fabric in a way that has exceeded my expectations.

Yeah, I mean, it's incredible. I know because I work with the pagerduty.org team as well, and some of the stats they share are incredible about the percentage of employees that volunteer time, the scale of the impact, tens of millions of dollars that they can deploy, particularly as you all know in the last 12 months, the things that are happening in the world with the global pandemic, with— Yeah, we've been really focused on equitable vaccine distribution and education of late. You know, and I know the employees' resonance with Hey, our company just wrote a 7-figure check to go make sure that people that can't get vaccines, can't afford them, can get them. That makes you feel good and attached to the purpose.

Totally. And I also don't have to give away money from our P&L to do it. That's right. And we're not profitable. So I'm kind of thoughtful about that, like what I do with our shareholders' money. So take the 1% Pledge. It's a great long-term commitment. And it will— I'm sure it will exceed your expectations as well. Absolutely.

Every, every company out there listening in, if your leadership team hasn't considered or taken the pledge yet, do it this year alone. As Jen said, you know, we work with the Pledge 1% org and the CEOs considering it. And I think we're up to about $600 million have been created in value set aside with the equity created from the IPOs. Absolutely. Year alone, we're talking billions over the last several years. And so This is a very powerful way to do for our industry and our companies to do good in the world while we build great, great businesses. Absolutely. So we're very fortunate. All right. We've only got a couple of minutes left. Last, last question. Running a public company ain't easy. It's hard, hard work, especially, I understand, in a pandemic. Turns out that just adds a degree of difficulty. How do you think about staying sane? Insane and your own wellness, your own development. Who do you turn to for support and counsel? You.

I mean, you know, the first thing I would say is like running a public company is a very lonely job with a very big audience. You know, like you go to school drop-off and somebody notices your compensation changes or they saw that your stock was down, like, and you're having those really interesting conversations with people who you hardly know. You know, in the pandemic, like managing through a crisis, realizing that our employees were— didn't trust their government and didn't trust local authorities and were coming to us for information around how to stay safe and keep their families safe. You know, having to shut down our offices globally in a 24-hour time period and thinking we'd be back in a few weeks and finding, you know, we're never going back. I mean, we have offices that are now more like the Soho Club. They're a place to sort of collaborate and hang out, but, you know, people are not going in there on a day-to-day basis. And that flexibility has been one of the great, you know, benefits of this. What I learned from people like Samir and Zach Nelson, who's on our board, Bonita Stewart, is that I have to take care of myself and my health first. So some of the things we changed, I don't take a meeting before 9 AM in the morning. I exercise every single day. I put my own oxygen mask on first. In order to make sure that I can serve the business no matter what comes. Because there's a lot of unanticipated work in the CEO gig. There is no structured predictable day. And so, you know, just kind of summarizing the key takeaways, because I know we got to go. Know why you're going to go public. I think your investors want you to, but know what the why is for you and for your team and your customers. Make sure that in that process you're thinking about signaling the next milestone and managing employee sentiment. Design your business for durable growth. It will pay off later. If you don't, it will be a big problem earlier than you think. Build a very deep leadership bench because you can't plan when you're going to need to move some things around. Make sure that you're doing well but also doing good. You have a huge opportunity and a huge privilege to change the world around you. And put your own oxygen mask on first. You're no good to anybody if you are not in good state of mind, great mental and great physical health. Sounds awesome.

Great lessons for all of you out there listening, thinking about taking your companies public, and most importantly, how do you scale it and be successful as PagerDuty has as a publicly traded company for many, many, many years to come. Thanks, Jennifer Taha. Thank you. Thank you.

So great to have you. Thanks, everybody. Great to see you at SaaStr. Hope to see you soon.

All right. Take care, everyone.