Diane Greene on Scaling Products and Culture At VMware | Blitzscaling 15

This is session 15 of technology enabled Blitzscaling, a Stanford University class taught by Reid Hoffman, John Lilly, Alan Blue, and Chris Yeh. This class features Jerry Chen of Greylock Partners interviewing Diane Greene, the founder and CEO of VMware and SVP of Google's Cloud businesses. This podcast has been produced by Greylock Partners. For more podcasts, class notes, slides and videos, please visit greylock.com I'm really excited.

Here to spend time with Diane Green, who is a friend, but I also consider as a former boss and mentor of mine in my career, I was lucky enough to intern for VMware in 2003, was in grad school, and it was a small technology company of a couple hundred employees and that no one really got. And then 2004 people were like, at business school, why are you in this company? Like, the smartest people I've ever met worked at VMware. And the advice I always give folks that ask me for job or career advice is find the smartest people and go work with them, because you're going to learn a ton. So Diane Green was founder of a couple companies, but most famously, at least, most recently, she was founder and CEO of VMware, which she co founded with her husband Mendel, who's a professor here at Stanford in 1998 with three of the grad students, Ed Allen and Scott. And then Diane was talk about scale up or blitzscaling to a CEO and founder of the company. From those first five individuals in a small office in town and country to over 7,000 employees, $2 billion plus in revenue, plus an IPO. And so it's an amazing journey from going from zero to 2 billion and to 7,000 employees. And so, and on top of that, now Diane is co founder, CEO of another company, which we might talk a little bit about what she's learned the first time she scaled up a company to this time. And in addition to that, she's on the board of Google, she's on the board of Intuit Khan Academy and a small technical college in Massachusetts called mit. Anyway, why don't we just all welcome Diane Green. Thank you.

So Jerry made VMware fun. So when he asked me, I was like, oh, this will be really fun. You guys should have fun with Jerry. He loves to be teased.

Okay, that's not on the sold list tonight, but thank you. Well, speaking of fun and culture, why don't we start with that around people? And I know if there's questions and students, I think Diana, feel free to raise your hand and ask questions throughout the conversation because we can steer the topics which way you want. Let's talk about culture. When you scale up, VMware was doubling in headcount pretty much every year, if not every other quarter. It's just increasing a bunch of people. How do you keep hiring and keeping both. Hire the right people and keeping the culture strong for those early days, I.

Mean, actually the hardest, most difficult hiring.

Was in the very beginning because we couldn't convince. I mean, we had this idea that was we hadn't exactly refined our elevator pitch. And convincing people to come was a big deal.

And so each person, it's really interesting.

Because right now I have a startup and each person is a big deal.

And then all of a sudden you're.

Hiring 100 people a month. And it's easier, but so you can remember that it will get easier. So you can never drop your standards, obviously. And that's why it gets easier, is if you create a strong culture and really good people.

And when people come in and it.

Speaks to them, it's sort of fun. It's got the right look for them. We were competing with Google when we were building VMware.

And I just can't quite believe I'm on the board right now because I did not like them.

There's a story about people search for VMware on Google, right?

And they would see, oh, yeah, my husband Mendel, who's a CS professor here, they put, if you searched his name.

It said, want a job at Google?

And we were like, you can't do that. But, yeah. So, I mean, we started out friends and we used to go to each other's parties.

And then we realized we were competing for talent and we never talked to each other. And then we got really kind of annoyed with each other. And actually, when I'm digressing, but when I joined the part of Google, Larry and Sergey said, one of the reasons we hired Diane is VMware was the only company we lost people to.

And when they lost people, it was generally because, and this says a lot about our culture, we found that people that had a big hobby, like they.

Raced bicycles or.

You know, they just.

They like to go backpacking sometimes or.

Did different things besides just work, they would. Or if they're a little older and just starting a family, they would tend.

To want to join us.

And if they really wanted a way.

You know, a full 24 by 7 experience at work, they went to Google because Google was running a 24 by 7 service.

And that was kind of how it split out and we got a lot done in our workdays, but we didn't.

Have nearly as long hours as Google.

One of the things you talk about is this autoimmune system when hiring, bringing people in, they would say you'd be great at hiring and great at firing or both. Right. And so talk about this concept of a cultural or autoimmune system at VMware.

Yeah, actually my new company has it too.

It just happens magically. And what it is is you get a critical mass of really good people and when you bring someone in that.

Just isn't like people aren't liking their check ins or you know, if they're an engineer or they're just not keeping.

Up with the conversation, they kind of self elect to leave. And that is the most effective thing.

You can have to keep the quality of people. I mean you have to watch and help someone leave if they're the wrong person. But I can think of a few examples. We hired a performance engineer and two weeks later he left. He's like, I'm in the wrong place for me. And I remember hiring a VP of engineering at one point and three weeks.

Into it, his tenure.

We had an off site and I.

Thought he was fine. He didn't say much. But right after the off site he came in my office and sat down. He looked really shaken. What's wrong?

And he said, I really couldn't keep up. I really didn't know what was going on. And I'm like, what do you.

I said, oh, there's so much to learn. Don't worry, you'll get up to speed.

And he goes, no, no, I mean it. This is, you know. And then I realized he wasn't going to make it because he just didn't have the confidence. I actually think he was smart enough, but he just. And so I said, okay, that's interesting.

When you scale that fast from 1001000 to 10,000, there's always this tension between promoting from within versus hiring folks from the outside that either have seniority or domain experience. How do you balance that and how do you think about that?

So whenever I went to hire the first of something, I really went for just as much talent as we could possibly find.

And I didn't. I mean, maybe it was my naivety.

But I did not go for someone that had been a VP senior person. I just went for the. So for instance, Jason who ran professional services or Jeff who ran ses.

So these were two. So one of them actually who was.

A Stanford grad ran the Track team. Yep.

Jason Martin, cross country team here.

Yeah. But he had been at two companies running professional services.

I think he had been a first line manager. They weren't all that big.

And I met him and this guy was just so driven and so sharp and just the nicest person in the world. And so he came in as an individual contributor and he scaled that organization.

Up to, I don't know, it got to about 1200 people, over a thousand.

Not just the US worldwide.

And not only did he scale it up without a hitch, I had thought.

We would have to run professional services cash neutral.

He ran it as a profit center. He was like, no way, I'm not.

Going to, I'm going to be a profit.

Not on my watch. And that guy was amazing. And so it was just wonderful to.

Have him grow up with the company.

Because he made, he understood the company, he knew how it worked, he knew everybody at the company and he was, you know, he knew the nuts and.

Bolts of it from being an individual.

Contributor and the same thing. We hired this guy who had been a pilot.

In the navy and I.

Always hire a military guy if you can.

They are the best, they're so disciplined and especially in anything approaching sales. I really love military people and never had one of them go wrong.

And anyhow he came in as an.

Individual contributor doing sales engineering and he built that team out to quite large.

Yeah, he's still there and he's still there.

Yeah.

And I remember when VMware we could all fit in one lunch room and every Wednesday you would stand up and we just in the room smaller this and we just tell everyone what happened that week, what's happening the next week. And then obviously that communication, the transparency was great. But then you're a public company, the company's several thousand. How do you maintain that communication, that scale?

Right. It does get hard.

One little thing I was going to.

Mention that I personally loved about and I'm sure none of you have a.

Problem with this, but I was very.

Shy and very self conscious and got nervous in front of people when I said started VMware. But when you give a talk every.

Week in front of a growing company, before you know it you're talking to.

A few thousand people. But since it happened so gradually, you're not nervous anymore. And that's how I conquered my fear of being in front of people.

But in terms of how do you.

Keep the communication up?

I mean as we got bigger we.

Sent out, there's much better mechanisms.

Today we sent emails out to everybody we did have big all hands. But the other thing that was really good that I thought worked very well at VMware was every Monday we had a staff meeting and I had a.

Requirement that everybody on my staff, I.

Said, you're welcome to do it Friday.

But by 9 o'clock Sunday night you.

Got to get me. And it's not a status report. What it is is a write up of anything going on in your group.

That everybody else should know about or.

Anything that you need to coordinate with.

Your peers, take advantage of this meeting.

And they had to send it to me every Sunday night by nine.

And then at nine o' clock I would put it all together and then I would write mine and highlight what.

I thought was important or anything I.

Thought I wanted to tell people about.

And then I would give that out to everybody. And that meeting, I also always invited the founders.

So particularly Ed Bunyan always came. Scott came to a lot of them.

And they were individual contributors in the engineering organization.

And I always thought that contributed hugely to the culture because everybody knew that these two engineers were in every staff meeting. So there were no secrets. They could just go ask these, hey, what's going on?

And they would just tell them.

So it was a way to get the information out.

And then the other thing was that this staff report went out to my staff and then they could selectively share it with their staff. And the funniest thing happened because I never asked anybody to, but everybody started making their staff by Friday, get them the same write up. And I hear people still do it over there.

I still remember Diane. Basically I was a young product manager calling in or emailing about some customer interaction I had on early beta product. So Diane read everything that was going on in the company. Yeah, it's invaluable because at that stage it was a great way to understand really quickly.

It's so efficient.

There's nothing more efficient than that. Yeah.

I have a question. Otherwise you're playing on. On doing differently with the new company as it scales up or roughly similar?

It's roughly similar. Although.

Just a question is with the new company, are you planning to do this communication same or different with new tools?

Yeah, it's really interesting. My new company has a lot of very different kinds of people.

It has designers, which are how many people here are designers? I've never worked with designers before. I have incredible respect for them, but they're challenging for me and I wish I could do what they can do. So I'm very at their mercy. And they do incredible Things.

But so you have designers who are.

Sort of not in the habit of doing something like that. And then you have all the other people who don't mind doing writing this up.

And so I've been using it to kind of get everybody to know how to communicate with each other. We're not really using it to run the company because we're small enough, we don't need it. But it's been invaluable as a way.

To get everybody to kind of speak the same language and care about the same things because we're all so different. It's been an interesting purpose, it's been super valuable.

But the other thing that thing is.

So good for is when you get to bigger is when you bring in a new, like I brought in a new CFO and a new head of sales. And I said, here, go read all these and you'll know exactly what's been going on. And nowadays people go, here, go search Slack and read all the interesting channels and you'll know what's going on.

Maybe I want to move from people to talk about the products, to go from more of the product side. You know, VMware started with selling workstation via download. And then later this thing we call shrink wrap software fry is where people actually, you know, buy CDs and then added, you know, GSX server, then ESX server. One of the questions I always wonder is like, how do you know when to add new products, new product lines? A lot of companies start out, they have a hip product, they write it and sometimes they don't come up with the second act or third act, second, third product. So how do you know when and how did you guys create this culture of finding experimenting new products, like starting the desktop business, for example?

Well, we actually wanted to, I mean.

Our vision was to build the server product. And we're like, nobody's going to put.

Our, you know, nobody's going to remove.

Their operating system and put our quote, bare bones hypervisor operating system on their hardware and run all their mission critical workloads. This is not going to happen.

So what can we do and how can we test this software?

So we wanted to do the bare metal hypervisor, but we went, that's just.

Not going to fly.

We have to be much less disruptive.

So then we're like, sort of Linux.

Was just happening and we had this idea, how about if we did it.

As a tool to run Windows applications with Linux and we can get.

The heart of our system was this very difficult piece of code called a binary. Translator.

And we can.

For the x86 architecture you don't have to. It's not so hard anymore because of the hardware assist.

But anyhow, we can really get the.

Bugs out of that.

So we said, let's build this tool and the problem, we'll build it on the desktop. But then we had this terrible problem.

Of all the devices and we couldn't possibly write a device driver for all the. Because we were basically the os.

Mendel actually had the idea, oh, we'll just have Windows there, which has all the devices and we'll pretend like Windows is running and then we'll shove it.

Out of the way and pass use its device drivers. But we'll take over the system and.

Then we'll be a tool to run Windows with Linux and we'll see if.

People like this and we'll get all the bugs out of our system.

And Linux was just happening and everybody thought we were geniuses because Lina Torvalds.

Got put on the COVID of Time.

And they're like, how did you. You know.

And we didn't. We got really lucky.

And a bunch of companies tried to buy us as.

A Linux tool back then.

And so the question around that is the first product market fit you had was around workstation, just like Windows on Linux and Linux on Windows. And you're right, you could have gotten stuck and people could have gone.

There was another company that tried to.

Go into the server first. They weren't doing the technology we were.

Doing, but they had a. They were kind of a container company. There were two container companies that tried.

To go into the server business and neither of them made it.

So when did you know to revisit the original vision to go to the server?

Well, we were building both products from day one. But what happened was sort of funny because the desktop business did pretty well.

We got that thing to 100 million in revenue.

We were pretty happy about that because.

We thought we might have to give it away. We weren't positive because Linux users, but.

We figured we made more money on.

Linux than any other software company.

That's probably true.

But anyhow, even though Michael Dell, this is a very funny anecdote because he just bought.

He's trying to buy VMware.

He was quoted in CNN, he invested in us.

Am I jumping around too much?

Okay, he invested in us and he was quoted. He said, I'm investing in a lot of Linux companies because I want to.

Equalize the playing field against Microsoft.

I'm not going to make any. I'm going to lose money on all of them. VMware, Linux care. You know how many billions of dollars he's paying for VMware right now?

It's funny.

Anyhow, because you know, when you're the CEO of a company, you.

Don'T really like seeing Michael Dell quoted as saying he's going to lose money on his investment in you.

I don't think the audience realizes this. With Workstation $100 million, VMware was cash flow positive.

We were cash flow positive from day one.

Day one. Right. Which is amazing.

But we ran the company at break even.

We just ran it at break even.

But what happened was we were going.

To bring out this hypervisor, this bare metal way to do virtualization. Does everybody know? Does anybody want an explanation of virtualization since we're talking about it so much?

Basically, it's a layer of software that.

Sits in between the hardware and the.

Operating system and it kind of masquerades as hardware. What it does is multiplex the hardware.

So you can run multiple virtual machines.

At the same time. And you can run any operating system.

You want as long as it's binary compatible with the chipset in that virtual machine.

That had benefits on the PC because.

You could run Linux and Windows together or DOS and Windows 95. Then on the server, it solved all kinds of scalability problems. Because we mostly benefited from Microsoft's bad operating system that you could only run one application on it. Like database vendors and whatnot would only let you, if you wanted support, you could only run their software on the operating system. So these servers were vastly underutilized. So what we let you do is run one per virtual machine. And then all of a sudden you got the utilization up.

But what happened was, we want to.

Bring out the server product, ESX Server. You know what the name is?

Yes, I do.

We went to bring this thing out.

And we launched it and nothing happened and nobody was buying it.

Meanwhile, we had also had this idea.

We could take our desktop product and repurpose it as a server product. We barely did anything. We just said, it's a server product.

And we called it GSX Server.

People liked that and they were buying.

That, but we just couldn't get them.

To buy ESX servers.

So then we invented the preferred hardware vendor program and we told all the hardware vendors that everybody was signing up to the preferred hardware vendor program. Here was the deadline, and you had.

To have someone willing to support this and you had someone willing to take it to market. And we had to get all these People. So we went to HP and Compaq and they weren't merged yet, and Dell and IBM.

And anyhow they all got worried and.

Signed up for hardware vendor program. And so we relaunched ESX Server.

Nobody knew we had already launched it once.

And anyhow that worked out that time.

Let's talk about that so early for ESX server using these partners, IBM, HP and Dell. Compaq were key channel partners, so that helped scale. And I remiss for not explaining virtualization in the beginning class. VMware started in 98. For the first 11 years, it was the fastest growing enterprise software company in the history of tech. Faster than Oracle, Microsoft, Veritas in terms of revenue growth. It was based upon the technology Diane Mendel and the founders built. But part of that super scale was a great product to find the right channel, the right go to market. So maybe talk a little bit about the relationship with IBM, HP and Dell and the server folks and how do you use them? How do you stay neutral between all these parties?

Yeah, it was great. I mean, we basically were pretty channel neutral. We had every channel. We had telesales, we had direct sales, we had resellers, we had value added resellers. But our focus was really on the hardware vendors. And, and I took this attitude that.

We were going to be Switzerland, which you don't see in too many companies.

It worked extraordinarily well for us, but.

For some reason, people, they get a deal and they're willing to give exclusive or preferential rights when they do their partnerships. And you see it all the time. But I said, no, we need to run on all these hardware platforms. And I had an algorithm. I said, customers first. What's good for the customers is good.

For the partners and good for us.

Partners second.

What's good for the partners is also good for us. And we came last.

And that works so well. So if you use that algorithm, you don't want to do preferential treatment to a hardware vendor because who knows what.

Hardware your customers want to run on.

So I wanted to be Switzerland. So I told all the hardware vendors.

We'Re going to treat you all exactly the same.

Here's the terms. If you take us into an account, we promise not to tell anybody else about the account, and we'll work with you and we'll put people, dedicated people on your hardware, on your storage, if.

You'Ll support that with us.

And if you develop something proprietary with us, we'll keep it proprietary for you. And if we develop it, we'll share it across all the hardware vendors. And we just had this whole sort of dance worked out that was very clear to everybody. In fact, we actually wrote it down.

Eventually as rules of engagement and sent it to all of them. And I told our salespeople they'd be fired if they ever violated it. I only had to fire one salesperson in the whole history of VMware for that.

And so anyhow, so we did this neutral thing and they would argue with us, but they went, you know, I think they liked it because they knew they could trust us.

Well, most famously, even after EMC bought VMware, you doubled down on that neutrality. Almost the fact that all the partners.

You got me fired eventually. But.

Customers first, right? To your credit, you do the right thing for the customers in the early days and they're like, no, we're going to actually treat every other storage company equally, if not better, because it's right for the customers.

Right.

And it worked. I mean, they were just a humongous channel for us.

And we had that added complication that a lot of our customers were running Microsoft. I'll just finish this. Were running Microsoft operating systems.

And Microsoft wouldn't let us support Microsoft.

Running in our virtual machines.

And enterprise customers aren't going to run software that's unsupported. Then the hardware vendors became extraordinarily important to us because they all had support contracts with Microsoft. They didn't mind having some leverage over Microsoft. We got them all to do the frontline support for Windows when it ran on their hardware in our virtual machine.

So we had IBM, HP and Dell doing, giving the support contract to our.

Customers if the customers wanted that.

And so we didn't get hurt at all by Microsoft's tactics there.

It's amazing, right? You think about Oracle tries to do in terms of support, Microsoft early days. Having friends early like the OEMs was great. Critical.

That was huge.

Chris had a question.

You said something about if they took you into an account, then you wouldn't tell.

So for instance, if just the question.

Is clarifying, when Diane said if a partner took VMware into a customer account, the statement we would not tell the other partners.

So if our sales guy went in with an IBM person to an IBM customer and that sales guy happened to.

Be best buddies with the HP sales guy, they couldn't tell the HP sales guy about that deal. That was very important.

Why did they hit what HC won't come in and try to struck the.

Deal if they know someone's in the market to buy some virtualization so we.

Had this wonderful thing. If you bought virtualization, you ended up buying a ton of hardware.

So oh, that customer is going to buy a bunch of VMware. I want to sell the hardware.

So in terms of thinking about this strategy, using partners for the folks, Learning for every dollar of VMware sales, generate 8 to $10 of storage servers and add on services around it. And so they could make a ton of money. They could give the VMware away for free.

That HDA stuff, it got even higher.

Yeah, it got even higher to like 12 or 14. They could give VMware for free and make all the margin back on the storage and the servers. And so it was a hugely profitable partnership for these companies. Let's talk about the sales then organization and scaling that out from single individuals like Jeff doing the first SE and then adding more sales reps and more territories. Just talk about when do you. One question startups always have when hit the scale up is do they hire sales too early or too slow because they typically their expense. If they don't make their number then it doesn't look great. So how do you think about when to put a poorly gas if you will on that aspect of the business?

So we.

This was pretty new territory for us and we're like a salesperson, we gotta go find a salesperson. We didn't even really know what they looked like. And I remember one of our first was this amazing woman who was a stand up comic. She made a really good salesperson, but.

Anyhow, I can't remember her name but anyhow we went out and found two or three different salespeople.

They each did different kind like one.

Worked with channels and one got on the phone and one was, I was learning all this terminology.

One was what they called a direct salesperson. They went out and talked to the.

Customers and so we tried one of each and we said okay, what can you do?

And then we really paid a lot of attention.

And we had to figure out whether they were bad salespeople or.

Whether we didn't have the right market because we weren't really sure which it was.

And that's the hard thing in a startup. And so with trying every approach we started seeing some traction in places. So we had a sense, we had a, we had a product fit in the market.

So then we started. Well, I started getting introductions to every VP of sales I could to hear about what they thought, how we, they.

All had a completely different way we.

Should set up our sales. But it was really interesting to hear it I went out and studied sales.

And that was how we developed. We realized our CFO at the time.

Tom Durowitz, just a wonderful, wonderful person.

He and I and this other guy.

Jeff Byrne, we came up with this model from studying all these different sales organizations all over the place.

They actually teach this model at the.

Stanford Business School that we came up with. I think Kirk Bowman, Bowman teaches it.

But anyhow, we said we had this really technical product, it was really hard to deploy. And so we said we need someone on the phone kind of drumming up business and kind of explaining virtualization. We need a sales engineer to go in there and find out how it's going to run on their hardware and.

If they have compatibilities with their storage network and so on.

And then we need a direct salesperson to close the deal. So we're going to make these three person sales team and we're going to give them all one number. Now the direct sales people always make.

More money than anybody and the SES make the least amount of additional comp.

So they didn't all get the same amount, but whatever they got was tied.

To the same number and how that team did.

And that worked like a charm. And then the other thing we did that worked like a charm that was little different from what a lot of people did was we said, okay, we want to make you as productive as possible. So if you can go sell with our partners like IBM, Dell and hp, we'll give you the same commission for that sale, even though we don't make.

As much money because we have to give some money to the hardware vendor.

But we're going to make you compensation.

Neutral regardless of what channel you sell through. And we gave them a geographic territory and, and boy, the smart sales guys.

They just went all out educating the channel, helping the channel. And they got this really leveraged market.

Where they were making millions of dollars.

And I loved paying them the millions of dollars because it meant VMware was.

Getting even more millions of dollars and it was really effective.

So I mean the fascinating thing, two lessons, One, having this triumph of the inside sales rep, the SE and the direct sales all on the same team compensate the same number, number one. Number two, a lot of folks don't realize when you have this indirect channel like a reseller or an HP to say like even the HP sells the deal, you still get paid even as if you.

Direct sale.

Direct sale. And so you, your incentive was to get as many partners out there on your side. And so the, like I said, the self selecting the Smart sales executives realized if I could just train a bunch of my channel partners to basically do my work for me, even better. And VMware is able to ride that leverage, if you will.

Yeah, yeah, it was great.

And then we had no politics because everybody was in it together and everybody.

Was getting rewarded during this growth.

One thing going back to the product.

Side, I mean, my advice is I.

Think it pays to be generous in sales.

Yeah, well, let's talk about that on the back of the people side, let's talk about compensation for sales.

I mean, you know, if you're not.

Getting traction, hiring more salespeople doesn't help.

You got to get the model right.

And you got to get the market fit right.

Yeah, but how do you think about compensation, you know, when the new company, the old company, like cash equity, you know, salaries. I'd be kind of curious.

It's different today. You can make more money at Google and Facebook and all these unicorns. Well, for the time being, the unicorns, some of them are real, but it's very real. But anyhow, you can make more money there than you can if you come late stage to a startup. We didn't used to be the case. So now the startups have to take huge amounts of money to pay. You know, you can't. If you pay startup wages, these people are going to come out behind where.

They would have come out had they gone to one of the bigger companies because the salaries are so high.

So you're finding with the new company you have to increase the salaries considerably.

Well, I haven't had to. I mean, I have this incredible team, but I actually did a little study on it and I realized this isn't fair. So I took a bunch of money and I started paying people a bunch.

Of money because it wasn't right.

That's great. Yeah, I want to move back to the product side. And one of the things when we talk about how you keep scaling up, you found this product market failure inside the Provera tornado. How do you enable your R and D teams just to keep coming? Disruptive types of technology, vmotion or live migration or HA or fault tolerance. And even after the core virtualization was such a magical piece of technology, you think like, hey, we're done. But the VMware product teams didn't stop. The engineering team created live migration. They created HA Fault Tolerance Resource Management. So how even has 7,000 people along that scale? How do you encourage and foster that culture of startups within VMware?

At the time, I mean, we just had Exceptional. We really had exceptional people that pushed each other.

I mean, one thing culturally you want is you want to have people that.

Are self driven, like they said.

I mean, even the person sitting at the reception desk, you want that to.

Be a driven person. Every single person in the company, no.

Matter what their role, to be someone.

That likes to set the bar high for themselves.

And so I think we had that.

At VMware and then we expected it of everybody.

And I have had people say they really enjoyed VMware because they did more.

Than they thought they could do.

So I think these high expectations are good.

They say to do that with your kids too, I don't know.

But anyhow, in engineering, I don't know if it was real or not, but I always said to our VPs, okay, give me your schedule, but put a little slack in it so people have.

Some extra time to kind of play around.

You know, don't schedule them to the max. Always leave a little slack in the schedule.

And I always coached them to do that. I don't know if we knew what we were doing and scheduling enough to.

Really do that, but that was the philosophy. And then we did things like we had these poster sessions. We would have these little conferences within VMware where people could write a little.

Paper or a little proposal about a new technology and present it, and then the top people would win something and also get to go build it if we chose it. And that was really helpful.

And also there was just this sort of fun thing. Like I remember when, you know, when the Mac moved to x86, everybody's like, we gotta build VMware for the Mac. And so I went over, you know, I was trying to talk to Steve Jobs about partnering and he wouldn't have.

Anything to do with it. He just thought, what do you guys get out of my life?

Machine?

No, never, right? Yeah.

Somebody told me he liked me, but I don't know.

But anyhow, Apple wouldn't give us the time of day.

And so I told everybody, oh, we cannot build this because they don't want us to.

It's illegal.

But I'd walk around engineering and I'd see all these Macs and it was kind of obvious what was going on. And I'd just kind of go, what's that Mac there for?

But I wouldn't say anything.

So I made it really clear that if you were showing initiative and doing good things, we liked that.

No, you weren't going to get in trouble for that ever. And I think I didn't even have to do it. It was in the culture. I mean, it was just great people. We were lucky.

We were lucky. Well, I think two things. One, there's always the carrot and the stick, right? So if you were innovated, I think there was a culture of rewarding that. But there's also, I think with some companies, as you scale up, there's a fear of failure. Right. Because if everything's going right, you're feared to try new things. And I don't think we really had that at VMware in those early days because we were trying a bunch of things and people weren't worried, like, if it worked out, great. If it didn't, we had to slacken the schedule, so to speak.

We also, when things went wrong, we.

Were always really careful to talk about how to prevent it from happening again, but never to say, this person screwed up. You know, we never highlighted someone screwing up.

We did highlight our mistakes, but we.

Divorced it from who it was because it was. We all took responsibility somehow.

It always goes back to the people. And maybe I'll segue back to that culture in hiring. I would love to talk about diversity as hiring and growing, both gender, age. I know it's a topic you and I have talked about a lot. So how did you think about that when you were scaling up VMware and with the new company, how do you think about it now?

We have this attitude, let's hire everybody we can out of Stanford and MIT and Brown and a few other schools.

So we liked bringing in intern.

We actually pioneered that intern program, actually. Vijay, our office Manager, Back in 1999, we had an intern program where we went out to the colleges and recruited people to come before they were graduating to come spend the summer with us if they were a junior. And we made a big deal about it for them. And then if we liked them, we made them an offer. So we got a lot of people that way. It's a little more competitive now.

But, you know, we tried as hard as.

We could to get all kinds of people.

It was hard, you know, it was.

Hard to find women. We had a fair number of women, but, you know, there wasn't a huge problem select, you know, huge pipeline. I mean, I understand now, you know, it's the biggest major for women and CS here.

That's great.

Yeah.

How are you doing the super early stage hiring with the new thing? Is it like 100% personal network this time or are you using other.

The question is, with Diana's new company, how is she doing hiring the first.

How am I recruiting?

Yeah, it's.

I mean, the beginning was personal network.

We're only 36 people and so there's five former VMware principal engineers and a former senior VP.

But we also have, well, for instance, design. I mean, it took me a while. Just like at VMware, I had to.

Keep upgrading the VP of Sales because I really didn't know what a great VP of sales looked like. And. And it took a while. Kirk was a very good VP of sales and so was Carl, but it took a while to get to them. I had to keep one.

I couldn't attract a great one because.

We hadn't established ourselves. So as soon as I could upgrade, I would. And it was a continual process.

And so with my current company, I.

Kind of had the same problem in design. I finally had to. You read about 10 books on design and go hang out in a bunch of Mission coffee shops. And then I mined my network and I asked everybody for any great designer that they knew.

And I finally found a fabulous head.

Of design, someone that was running design at Walmart Labs. And.

So that was just going out.

Very specifically to a bunch of people saying, I need someone to run my design. I did bring in a recruiter. We have an in house recruiter, but.

She doesn't really tend to.

I mean I recently, this is my favorite hire.

Someone sent me a designer resume and.

I was looking at it on LinkedIn.

And on the side popped up a picture that this woman. I was like, wow, she has so much energy and drive. I really like her. And I looked at her and she was a designer. So I sent her to my recruiter. I said, see if you can get her in. And it was purely based on the picture.

Too bad Reid's not here tonight.

I know. It was so amazing. So we hired her and she's an amazing designer and she told me that her husband is in advertising and he took the picture, so he's very proud of that picture. Isn't that a great story?

That's an amazing story.

Yeah.

Let's talk.

I would love to just maybe spend more on design. This user experience layer, which VMware built, this great platform and now you and Mendel are spending a lot of time understanding User ux, hci, Human computer interface.

Well, and also this layer, it's a mess. The layer above, like this HTML, css, iOS, Android, and how you talk to the back end and the database and update things and separate the database from the front end. It's an area of the system that everybody thought oh that's real software. Computer scientists do systems, they don't do that upper layer. So nobody's really not A lot of people have worked very hard on it. And then HTML of course was never.

Designed for what it's being used for. So that's a little bit difficult.

And it's incredibly difficult to test this stuff. And then you have to be able to rapidly iterate because you can't get your design right because humans are so hard to predict.

Some people think machine learning is going to do that design someday. But.

So anyhow I think it's. Well, we're designing complex interfaces where you have lots of roles and lots of.

Workflows and communications and collaboration and access.

Controls and to make that simple and.

Easy to use and rapidly iterate on that and test it all. We've had to build a lot of stuff to support that. Yeah.

So find the right again so core interesting. We talk about founders and the first like ex hires early or people you know you trust and then you find folks that are purpose with that skill like design or user experience and bring them in to.

I mean there's the product person and the user researcher and the designer and then there's some designers that are kind of product people and there's some.

You guys all know this. Some designers that can build the UI.

And then there's front end people that are sort of full stack people and.

There'S front end people that only do.

Front end or there's front end people.

That also do design and you have all these different kinds of people and then there's this whole process to bring it all together that's you know, I guess all this agile development is designed to try and help that but it's not trivial. My husband's teaching a course in this. We've gotten so interested in how to do this better. He's teaching the course in the winter.

I would compare notes with Mendel. We're looking at a bunch of stuff in that space too. Yeah, maybe to oh question.

This is not on the design topic but that's super interesting. So we look at a lot of companies at Greylock and for people thinking about starting businesses here. There are many companies that deliver value to businesses, but only one or two where to the CEO of the company. This is their strategic vendor. So you can go to lots of businesses today and they're right. They make all their other decisions about technology based being a VMware shop. A lot of that is the product. But did you guys ever aim to be like the core, like, decision making power in an enterprise technology organization.

Let me rephrase. The question is. It's a great question. VMware is a platform, maybe, and a lot of large companies now make a decision if you work on this platform or not. And in the early days, did VMware aim to be this platform for it that became such a standard or not? And when do you just make the decision or how do you fall into that?

Well, it was not all premeditated. I won't take credit for that.

But we did believe right from the beginning that this should run on every piece of hardware.

We were so sure this was a better way to run systems. We said, look, this should really run everywhere. And so we did think of it as a platform from day one to run. I mean, that's part of why we were neutral with the hardware vendors. And just a lot of decisions we made about what to support and not support were based on the fact that we thought it needed to be a platform to maximize its value to people.

But what we found, the beauty of VMware was it was useful on a single server, so someone could try it out and just some sysadmin would use it, just standalone, and it would kind of spread virally through a company in little tiny pockets and we could kind of see where it was going. So, so we actually didn't want to go to the decision maker right away.

Because there's, I mean, the CEO type.

Person, because they always have this person called the purchasing agent. And their job, their only job is.

To get as big a discount as possible and they're compensated on how much of a discount they get.

So you kind of want to stay away from that guy, particularly at a.

Place like General Electric. Big, huge company.

And so, so we would let it just kind of spread and our salespeople.

Would kind of map out the organization and if they saw a hole where they weren't using it, they'd go in.

And try and get it there. But we'd try and then we'd wait.

Till it was kind of all over the organization and then we go in.

And say, hey, look what's going on?

Would you like enterprise license agreement? And we would monetize it that way.

But we would wait and, but we didn't consciously say we're going to be.

Strategic to the cio.

What we consciously said was, this is.

Going to run on every single piece of hardware.

And that was, you know, we didn't.

Put two and two together to say, well, that's what's going to happen, but happily it did. Yeah.

One of the results.

There's a question.

That'S funny.

I thought you were asleep back there and you woke up.

Talk a lot about the stages in which you built virtualization and brought that to the world as well. You touched on your use of containerization and what some are calling Docker revolution. What's your take on that?

Well, the question is Diane's thoughts on virtualization now Containers and Docker.

He's the world expert on Docker. I'll let him say a little bit, but I'll just say that we couldn't do a container at that point in time because we had to be completely non disruptive. We had to make it like nobody believed in virtualization. Nobody believed in this kind of separation. Basically we actually built a tool, a P2V tool nobody was going to build.

For a virtual machine.

So we built a little tool that grabbed a physical machine and plopped it.

In a virtual machine by pushing a button. We had another tool we built that went out on your network and saw the utilization of all your servers. And we'd say these are really good candidates for virtualization.

You know, you couldn't have. You know, people do things incrementally.

They don't see the value.

And so VMware showed the value of putting things in containers big time. But it's a fairly heavyweight mechanism that.

Now that everybody appreciates the value and wants to do it, you know, you can kind of do these lighter weight containers. And I'll let Jerry talk about what he.

I mean, he's going to tell you.

Docker's going to own the world. There's also this kubernetes.

So the full disclosure is I left VMware 2013, joined Greylock. My first investment was in Docker. So I am. Two reasons for that.

Great investment.

Yeah, thank you. Well, tiers one, I watched firsthand what Diane Mendel and the rest of the company built at VMware for a decade and I saw the value of Docker and Containers were bringing as kind of the next wave, the next evolution. So I think I'm really excited we talk separately about Docker because I know the class focus on learning from Diane, but I think both Diane and on the board of Google that's very involved in the container ecosystem. We're both very bullish on Docker and Containers in that ecosystem.

She always wanted to do something in.

The lightest possible way. But there wasn't a market for it.

Before VMware and Docker would not exist if it wasn't for VMware.

Yeah.

Question.

Hey, Diane. So one question regarding the previous topic, you talked about VMware staying under the radar for a long time. So there is a lot of the culture of under delivered. Sorry, under promised, over deliver. But then there is also a different approach that a lot of companies think.

The highlight.

You know, get attention from the customers. Staying over the radar. So what is the trade off or what is the balance?

Well, just for the question is, VMware stayed under the radar for many, many years, both in marketing and awareness. And the culture was over deliver. Right. Just like be very understand, under promise over deliver. And the question was, now you see a lot of startups out there that are called over the radar, that they over promise and under deliver. But definitely, definitely there's a marketing around some companies out there.

Yeah.

So I think there's a lot of advantages to under promise, over deliver. The advantages are that you set your.

Pace and you do things when they're ready and how you want them. And you can also build trust because.

You don't bother to deliver till it's ready. I mean, you don't try and deliver until it's ready.

And so people come to trust your brand and trust the quality of your product. And we were building a product that everybody was going to run all their.

Software on, so they had to trust it.

We needed to be a trustworthy. That was an important part of our brand was to be a trustworthy company. And it was just a lot less stressful and just a nicer way to.

Operate because if our engineers said, oh, wait a minute, we gotta change something here, we could take the time to do it. And we hadn't like promised something to.

The market and forcing us to take shortcuts. The advantages of making a lot of noise.

Well, certainly if you have competition, it.

Helps to make a lot of noise.

And, and sometimes, you know, you can. I mean, there's, I won't name companies, but there are some companies that have done it that way and been super successful. Somebody once said to me, you know, Diane, if you took you and Mark Benny off and put the two of.

You together, you'd really have something.

I'll invest in that.

He's an extraordinary genius at marketing.

Yes. Let's talk about marketing of VMware. In the early days to the question, VMware didn't market very much at all. And then all of a sudden, in 2004, we created VMworld, this conference, and 1400 people the first year, then 3000 the next year. Now it's over 20,000 people. And I remember setting up chairs in the first year, setting up chairs in the last year.

I remember you like the night before making my slides.

That's a separate comment, but yes, I remember the night before making your slides as the first VM roll. But you made that an industry event, right? Not a VMware event. And at a company there's less than a thousand people at the time. That's pretty, pretty ambitious.

Well again, I really believe this stuff.

Belonged on every machine. I really believe that.

And I also really believed for it.

To be valuable to people.

It had to be very open. You had to let anybody participate and.

It had to be about virtualization, not about VMware.

It was totally open to anybody that wanted to come and it was just run with our partners in a very open way. I wanted it to focus on bringing virtualization to the world. I was, we had the virtualization solution.

Nobody was going to compete with our virtualization solution.

So it was a pretty safe thing.

To do from a company building standpoint.

It just felt really, it was really.

Fun to do it that way.

Yeah, I remember those slides. The message from day one was we're creating this new industry and you could rate the rising tide with float everyone partners in VMware included. And it was amazing what happened. And so the 20,000 people later to the platform question, then you had vendors building, entire startup ecosystem appeared around VMware. Large companies, small companies. How do you think about, I mean.

Over and over again we did the.

Generous thing and it always paid off. Whether it was with our own people, with the partners, it just seemed to pay off.

Well, this ecosystem spread around VMware. And one question I want to ask you is some companies now, when they're in the hybrid growth phase, try to buy their companies big and small to get mass. And VMware never did a big acquisition. Small tech ones here and there, but they never had to in those days. I'm curious your philosophy around M and A for startups or just scale ups as well? So growing. When does that make sense? When that doesn't make sense?

Well, I think VMware was a little.

Bit unique in that we were creating this new industry so there wasn't really anything to buy. I mean as we got further along and there started being companies to buy and I don't think we did a very good job at those acquisitions in all honesty because we didn't have experience, we didn't know how to do it.

And although we knew how to manage our Own.

I thought we'd knock that one out of the park, but.

Anyhow, yeah. So, I mean, there's a company out there, Domo, and that started with an acquisition and I think he did several acquisitions and I think he's doing really well. So number one, if you're a startup and you've never done an acquisition, I.

Think it's a really bad idea because there's super hard to make success. I mean, very experienced companies blow it all the time.

Most of the time, right?

Most, you know, probably 95% of the.

Time they don't work out so well.

And so, you know, you really have.

To know what you're doing.

And then, you know, it has to. You have to know what will work.

What kind of a fit.

And you know the guy running Domo, I forget his name, I think he's.

Just very talented at it.

Josh. Yeah. And just speaking of, you know, growing. So there's. You said early, you should avoid M and A if you don't know what you're doing because oftentimes they don't work out. If a big company can't be successful as a startup or scale up, you know, you should not think you're either.

It's a big distraction because they're very.

Time consuming and the smaller you are, the bigger distraction. Culture.

Right. How do you think about organizations and reconciling the two. One of the comments, just think about marketing, how we scaled in sales in conjunction. You said something about upgrading VPs of sales or your execs. When did you know it was time to upgrade? Was it because they missed metric or performance or you felt like you weren't managing folks well? What kind of stuff?

Well, it was always something different.

Yeah.

So, and that's still.

Could be engineering, could be anyone in your exact team. How do you think about upgrading people?

Well, I can give some specific examples.

So our first sales guy who ended up staying at the company, but he came to me when we were doing.

10 million in revenue and, and we were planning and he said, diane, there's.

Just not that much here. You're going to be lucky to get.

This to 20 million. And that was when I knew it was time to upgrade my sales guy. I'm like, no, I know we can do much, much better than this.

So I kept him as a sales.

Guy, but I went and got a new VP of sales.

The next one I caught lying, I had a VP of marketing that I.

Walked out the door because intel sent me a mail he had sent him.

And he had sent Them all our.

Confidential stuff, trying to get them to buy the company. I came to his desk and said, come on, we're going to your car. And that was that.

And then, you know. So really, anything can happen in a company.

It's always amazing the kinds of things that go on, but.

The, you know, if someone is not being treated like a leader, like if. If you have someone that nobody's listening to, that's a pretty sure sign that you don't have the right leader. I always had a really open door. Our first VP of engineering. People were just getting more and more frustrated, saying, he won't make a decision, he won't make a decision. And the old maxim is so true. When you fire someone, you never go, oh, I wish I'd waited longer. You always go, why didn't I do that sooner?

Bad news never gets better with time.

But you don't. The thing I always tell people is when you fire someone, it doesn't have to. Well, unless they just send all your IP over to somebody at another company, and then it's personal, but otherwise, it's not personal. And I always talk about the fact that, you know, you're going to be happier somewhere else.

I'll help.

You know, I hired you for a reason. I thought you were talented.

I still believe you're talented. You're just not a good fit.

Here, let me help you find another role. And I've remained friends with a lot.

Of people I've fired.

That's great.

Yeah. Yeah.

I was just wondering if you could talk about some of the other things you've done differently intentionally with the new company. Either like you as a CEO or just in the company in general.

The question is things that Diana has constantly done differently with her new company.

Well, one thing. I mean, it's such a different climate now.

I did this radical thing, which I never would have.

I would have told someone they were an idiot to do this. It's so hard to hire. And the traffic between here and San Francisco is really intense.

And. And my initial group had some people that lived up in San Francisco and out in San Ramon and some people that lived down in San Jose and Cupertino and whatnot. So we made a decision to get two offices from day one. And then we said two days a.

Week, one office is in Los Altos.

And one's in downtown San Francisco. And we said, two days a week.

We'Re in Los Altos, and two days a week, we're in San Francisco.

And when you're small, you can get an office big enough to hold everybody. And. And that's what we did. And then one day a week, anybody. Everybody can be wherever they want to be.

Two days in Los Altos, two days in ss.

Recently we've been slight is letting people.

Do one day because we know each other so well.

Yep.

But yeah, so that was a pretty wild thing to do.

But it's took all the friction out of hiring. It was really valuable.

So my question is actually more about now that you are on the board of Google, you know, Trump at Google, what is sort of the one thing you see. Ok, Google culture is so great. I wish I had that VMware and the Vice versa. You felt like this is something VMware did so well. I wish Google.

The question is Diane's a board member at Google. What's a cultural thing that Google does really well that she wished she had at VMware and vice versa? Is there. What's a cultural thing VMware had that she wished Google has more of?

Well, I think Google was bolder.

They knew not to sell And I wish VMware had had that. Although I didn't want to sell.

But you know, it was just Google has and it's gotten even better. I mean there's just.

A real boldness, you know, incredible quality, incredible people, but boldness about Google.

And really culturally we're going to do the right thing.

It's real. We want to help the world and. And I really like that.

And we felt that way at VMware.

But it wasn't quite as strong culturally as it is at Google.

Something I think we did better at.

VMware although we weren't at the same scale. So I think it's a little harder at 65,000 people. So I'm not sure I could have done it at 65,000 if we'd gotten VMware that far.

But I feel like.

Actually I not going to say. Sorry. I can say in private. Yeah.

What were the best and worst pieces of advice? The best piece of advice I ever.

Received was you can never over communicate. You know, I was at this startup and that I had a major disagreement little startup that did streaming video and I had a major disagreement with the other founders. I wanted to build software, they wanted to build hardware. You know. And so I left and one of the board members said to me, he goes, you shouldn't leave. This is, this is the biggest deal you'll ever be part of. I always remembered that.

Diane, you talked about like taking steps and sequentializing things and honestly learning along the way.

For.

A lot of us being undergraduates or students or just in the earliest days.

Of starting a company.

Can you talk about your intention in those earliest days starting VMware like back when you were an undergraduate or right before you found the company?

Well, the sad truth is I was pretty old when I found a VMware.

I wasn't an undergraduate. I'm so flattered that you think I'm that young.

But the question is steps that Diane was thinking about before she found a VMware.

Okay, so VMware, but I will tell you. So VMware was actually my third startup. And so actually my husband Mendel had invented this technology and he was working.

On it with his grad student or.

Invented this idea and they were building.

The technology with his grad students.

And, and the first thing that happened.

Was they put out a paper and all these people at Microsoft like Bill G. And Nathan M. And so on.

He got a letter from somebody, it.

Was under blind review. Somebody at University of Washington wanted to know if all these people could read it. They'd be very interested to read it. Wow, you should get a patent file before you do anything else. It was just in the graduate school in his research group.

And so anyhow, as it went along.

I said, I really think we should take this to market. This is really neat. And I start talking with my husband Mendel about all the different ways it could be used and I'm like, this should really get taken to market.

So we had the grad students over and I won't go into the details. We had a discussion with them about.

Whether they wanted to do it. They had some other ideas, but in the end they decided to do it. And.

About that time I found out I was pregnant with our second kid. So I said, okay, I've built, I've been involved in two startups.

I know how to do it because both had had good outcomes.

So I'll help get this off the ground, but I just, I've got a four year old and I'm about to have another baby. This isn't going to work for me, but let me get the company going.

And then we'll bring in a CEO.

We had this vision of what we were going to do and that it should be virtualization, should be on all hardware and that we would come in with.

The desktop as a way.

The whole thing I've described here because one of my previous startups had been a little dysfunctional.

One of the first things I did when we started, I said, okay, we.

Have to write our vision and our mission and everybody needs to sign it. And we're not doing anything else till we do that.

Because I had learned a hard lesson and we did that and we started.

Building the company and then I had my baby and we were in this office.

This isn't really answering your question, but I'll just finish this little story.

But we were in this office where.

You could open the windows and so I just brought my baby in because she could get fresh air and not much was going on. We didn't have any customers. I was just negotiating a license with Phoenix for a BIOS that we needed. That was all I was doing really. And hiring people and getting facility.

Did I answer your question? Okay, you had a question there. What's hard about scaling? Well, one of the hardest things about scaling VMware, ironically, the thing I remember as the hardest was space. Having enough space for everybody and anticipating it because when people get overcrowded, they.

Don'T work very well.

And it was during the bubble and rents went up to $10 a square foot per month. And you know, that's what put Donna Dubinsky out of business. She signed a long term lease at that rate and that's why she had to sell Palm. And I mean it was agony because we were, you know, it was just constant agony having enough space.

Also that balancing committing to a long term lease at the time, oh yeah.

You didn't know what to do and you know, we didn't do it.

And luckily the bubble burst and we were so lucky.

Even then, the hyper growth and companies are facing this now and how to plan these. Space is also physical. Space is culture. Right. In terms of two offices for you startup like where people are and you want a space that was early that people can collaborate, work together or two spaces. And I remember we went through office defrag a lot where we kept reshuffling, we had multiple offices and we kept redoing every six months. And I remember one office move, I opened a box and it was not my stuff. My office made from two moves ago and he had left the company like, oh, I have all of Jeff's stuff. So maybe we're running out of time. So maybe just last thoughts in terms of scaling up, besides space, if you give a piece of advice to students or entrepreneurs about one or two things to be thoughtful about, that'll be helpful.

Shoot, I forgot to think about that. You know, everything I can think of is so darn trite, you know, about concentrating on, on doing something you're really interested in and can be excited about and no matter what you do.

One thing I have thought about lately.

Which is that you can be an entrepreneur anywhere. You don't have to start a company to be an entrepreneur.

And I think it's a little problematic. I do talk at a lot of.

Schools when I travel, and I'll ask everybody how many are going to start.

A company, and everybody will raise their hand and guess what problem that creates. There's nobody to hire because everybody's starting a company. And so I think it's wonderful to build something. But you can build incredible. I mean, I was an entrepreneur before I started companies. The only reason I left the big.

Companies to start my own companies was.

Because they didn't have great companies back then.

And the companies were so horrible. They would just not do new.

I mean, they weren't that horrible. Tandem was a good company, but they.

Wouldn'T do new things they were so afraid of. They wouldn't jump off that elephant. They'd ride it right over the cliff.

So I guess maybe part of my.

Advice, and I don't know if you think this way or not, which is.

If you have an idea and you want to build something, figure out the.

Best environment to do that in.

And it might be starting a company.

And it might be doing it as part of something bigger.

And what's really important is who you're.

With and what you're building. And you can get tremendous. I think some of my most satisfying things I did were not. I mean, VMware was incredibly satisfying and fun. I wouldn't trade it for the world, but I did a lot of things I really enjoyed that were at bigger companies.

Yeah. Thank you very much.