The Playbook for Building Two Unicorns in a Row with Jyoti Bansal, Harness

What we look for is are the founders really passionate about this problem? Is this problem large enough? Do the founders have a unique advantage and insight about that problem? Do they have some technology inside? Do they have some domain deep experience that they have the advantage to win to solve that particular problem? And are these founders committed to the long term to build something big? I need some traction. You need some traction. Let's get some traction.

Hey what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host Lloyd Lobo. We're a community of over 100,000 people just like yourself on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana and many more, this episode is brought to you by Boast AI. Each year the US and Canadian governments give out billions of dollars in R and D tax credits and innovation incentives to fund businesses like yours. But the application process is cumbersome, prone to frustrating audits and receiving the money can take up to 16 months. Boast AI gets you access to research and development, tax credits and innovation funding opportunities without the headache and red tape. Join thousands of North American companies leveraging Boast AI software to maximize cashback. Check out B oast AI. This episode is also brought to you by Launch Academy and an international tech hub that provides mentorship, resources, network and the environment for entrepreneurs to launch, fund and grow their startups. Since 2012, Launch Academy has incubated over 6,000 entrepreneurs, of which 300 have grown their startups past Seed and Series A and have collectively raised over $1.2 billion in funding. To learn more about Launch Academy's programs, check out link launchacademy.ca super excited here for today's session.

Our serial entrepreneur and one of the top technology entrepreneurs I know first came to traction in 2018, I think after he sold his previous company, Appdynamics, which provided software engineers insights into code performance and AppDynamics was acquired by Cisco for 3.7 billion. And the funniest story there was. Jyoti was the closing keynote speaker and he was running a little late. And TechCrunch Frederic asked Jyoti that after such a big acquisition, are you still flying coach or are you flying private? But one of the most humble people I've met in my life. Super humble entrepreneur. Today he's the founder and CEO of two high growth technology companies, Harness and then Traceable AI. Harness was recently valued at 1.7 billion. And then Jyoti also founded Unusual Ventures to bring the experience that he had and his team had, as well as capital to early stage technology companies. And they have already, in a short amount of time, 600 million. Under management, Jyoti has received Forbes Best Cloud Computing CEO to work for Best CEO by San Francisco Business Times and Entrepreneur of the Year. So he Jyoti has a BS in Computer Science from iit. If people are not familiar with iit, it's probably one of the top universities for engineering on the planet. It's actually harder to get into IIT than it is to get into MIT. And Jyoti has more than 25 patents under his name. Jyoti, thanks for joining us. How's 2021 going for you?

Well, 2021 better than 2020. Great to be chatting with you again. It was a few years ago when we first started on in a forum or a discussion like this. It's 2020 and the last 15, 17 months have been strange and hard and as humans we survive through it and we adapt and we change. I'm excited and bullish about the new post Pandemic future.

Yeah, definitely. Pain is the precondition for growth. Walk us through your background. I gave a quick overview of you, but how did you get into entrepreneurship? You super smart, it's almost impossible to get into iit and then you got into entrepreneurship, did appdynamics, sold it, and now you have a number of ventures. Give us your background.

Sure. So my background I grew up in a small town in India in Rajasthan, which is the northwest part of India. My dad over there had a small mom and pop kind of a shop and a business. So I grew up watching business and looking at business. A lot of people in my family, my uncles and cousins and they all had these small mom and pop shops and businesses. So I was always fascinated by business. I also like tech and technology and math and science. So you know, I tried to get into iit, got in there, studied computer science. So to me it was a perfect combo. Business and technology is what I either two things I like as a when I was growing up. So after IIT I was most people at that time would normally go and you know, get a master's degree or go for PhDs and all. And I was fascinated by startups and so I I wanted to come to Silicon Valley and work in startups and so I just started applying to different startups in Silicon Valley and one of them eventually hired me and I came here and my plan was that I would work in startups, you know, one startup or two startups for a few years, learn like, you know, how do they work, and then start my own, because I was just fascinated by entrepreneurship, startups, and tech in general. It took a little bit longer than I thought because I came here on a visa, and on a work visa, you come here, you are not allowed to start a company. It's just ridiculous that you are not allowed to. But so you have to wait until you get a green card to do that. I waited for that, and I had no shortage of ideas or problems I wanted to solve. And AppDynamics was the first one I got very excited about, and I started that.

That's amazing. You sold AppDynamics and then you got into a number of ventures. But you started Unusual first, right? Did Unusual come first, or did Harness come first?

Harness came first.

Give us the background, because it's very interesting. I often wonder, like, I'm struggling to catch the bus after the 23 million raise. And you got Harness and you got Graceable, you got unusual ventures. How do you do it all? How did you come up with this concept?

It all comes down to what you enjoy and like to do. So after AppDynamics was sold, I was in this kind of, let's say, figuring out more of what do I want to do? And initially my first thought was, I should retire. I don't need to work anymore. I was fortunate enough. There was plenty of money that I made with Abdynamics acquisition, and I tried to retire. That was the first thing. So I actually retired for about six months. And I have a big list of things on. I wanted to go to Africa for a safari and wanted to hike Machu Picchu and wanted to go to Bhutan and see the fjords in Norway. And all that list was done in six months. And after six months, I was like, okay, I need to do something that I'm just not ready to retire fully. And what I realized is I like two things. I like building companies, and it's hard. Building companies is hard. Building products is hard. You struggle in the market, you find you compete. You have to do all sorts of things in the startup journey. But I enjoy it. I enjoyed it in App Dynamics. So why won't I do it again if I enjoyed it? So that one thing I. It was pretty clear to me. That's something I really like to do. The second thing I also realized is that I like to help other founders. Other founders who are going through similar kinds of journeys can help them in Whichever ways, with my experience, my lesson, some guidance, mentorship through investing. So that's what I thought. Can I find a model where I can do both? And, and obviously I started with Stop, you know, building. Building the. Building new companies in areas I'm very excited and passionate about. But then eventually I also co founded Unusual Ventures with my partner John Varianes there so that we can create this kind of a model to, to, to help founders at the earlier stages. Right. How do I do it all? It really comes to having the right people as your partners and your key leaders and team members. That's what allows to, to, to scale. So I look at, you know, the only, the only two secrets. One is only do things that you enjoy. Like it's. If you're doing it for purposes, which is. And you don't enjoy it, you're doing it so you gain something and then you will enjoy your life. Then it's hard to keep going. To me, this is what I enjoy. I could be doing this until I'm 80 years old. I love doing this. And second is having the right people. If you have right people as partners in your team, it just becomes easy.

Definitely. I think the job of a great leader is to build, inspire and motivate a team to deliver. That's what I've consistently heard. If you find the right people, it makes magic happen. So let's go into this. You built AppDynamics. How long did it take App Dynamics to get to a billion in valuation? Because for harness it seemed very quick.

Yeah, AppDynamics it took about, I would say seven years to get to a billion valuation. And harness it was much faster. Harness it was about four years and we are on a much faster trajectory. And there's some advantage of doing it the second time that you know what's coming. You can execute a bit better. You get. But also the time has changed. When I was doing appdynamics now this was early 2010s. Getting to a hundred million ARR was a, let's say a bit harder than if you're doing it today, getting 200 million ARR. Because the markets for like, you know, software, just software and technology have grown. The execution models have matured more. You could do much more with less number of people. There's just much more efficiency in the, in everything that you could. You. There is the opportunity to grow faster now at like when I was doing appdynamics, a billion dollar was like this ultimate magic number. If you get to billion dollar valuation, that was like the Biggest achievement you could get in the startup world. It's not that anymore. Now it's, you know, if you don't now there's. Because it's possible to be decacons and it's possible to be $10 billion, $20 billion companies of you like the very, very best of the startups now the bar has moved there now which is great for the entire startup ecosystem that the bar is higher. It's. You could build even bigger companies than a billion dollar value company that that was used to be the bar eight years ago, 10 years ago.

I think there's one law there, right? They often say in product, yesterday's performance feature becomes today's or yes, yesterday's wow feature becomes today's performance feature and becomes tomorrow's table stake. So I think next year 1 billion is a table stake. Otherwise lifestyle business, they'll start telling people. But the, but the other thing is you had some key lessons you probably learned at Appdynamics change the way you operate your ventures right now. And probably one thing that doesn't, probably not one of the factors. But if you ask most people what accelerated digital transformation in their companies at the enterprise level, the answer by far is Covid. So Covid has made some of that adjustment too. But what did you do differently this time? What did you learn from appdynamics that you said I'm not going to do it and it gave you some speed.

I think the biggest lesson I learned from Appdynamics and Abdynamics I was first time founder I started and when I was in my late 20s when I started Appdynamics I never managed a single person before. I was, I was an engineer and architect there in my startup jobs before. So I knew tech, I knew product, but I didn't knew the rest of like, you know, how do you manage people, how do you recruit people, how do you build business, how do you do, you know, go to market sales, all sorts of things like and how do you build a company? And so there was a lot of learning that happened on the job as I went through it. Like but when I simplify, when I look at like you know, okay, if I just have to summarize all the learnings and I have to use it in my next company harness, what is the summary of it? And to me it came down to I call it a very simple formula. It's my simple five point formula. A simple five point formula is there are five things to it. One is you have to make sure your market is large, your Addressable market that you are going after is not very small and you are constantly working to make it larger. And that's the second part. This, this does. You're working on it. To make it larger is very important that you start with something and you keep expanding it and expanding and expanding it. So you, the market need is getting bigger and bigger. It's not getting smaller every year. So that's the first part of the formula that you have to find that the market need is getting bigger every year. And the second part is you got to shoot to build the best product in your market. Like in the, at least in the top three. If it's, if it's in the top three products in whatever the problem space you are in, everything becomes much simpler and easier to execute on. So that's really the second part of the formula. The third part of the formula is very top notch sales execution. So the many times you could have a large market, really best product in the market, but your sales, you didn't focus on sales execution. And a lot of founders who come from product and engineering background, we don't know sales and marketing and we don't know how to execute on sales and we undervalue it also and not put the right effort and energy into it. So that is really completely wrong. As a company, you have to excel that sales execution is your strength in many ways in addition to building the best product in the market. So you have to combine that. The fourth is take care of your customers like and obsess with taking care of your customers. If you acquire a customer, just take care of them. And every business likes to say it, but you just, I like to believe in that. You just have to obsess with it. And fifth is the culture. Like you have to put a lot of focus on the right culture in the company where you're bringing that the culture is open, collaborative, transparent, people like to work there, people like to thrive there, et cetera.

Right?

And that's it. Like if you get these five things, everything will happen. That's how I think of it. So when I look at my building other companies, I put my lens with these five and I got to focus on that at a, at a macro level. These five, are we meeting these or not? And I tell every employee in the company, by the way, everyone we hire, I tell them, okay, these are the five things. And if you think you're not doing a good job in any of these or we are starting to get in a bad place on any of these, we should talk about it. Let me know, let everyone know. We should have debate and discussions on that. But that's really the formula from my learning some app dynamics that I'd like to bring into Harness and Traceable and my other companies.

This is fantastic. Actually. I want to throw the questions I had curated and I've dive into it, dive into these. This is way more interesting. Let's start with a large TAM here, right? You said constantly working to make the TAM bigger. Now a lot of people, they have this, especially engineers. I'm an engineer too. We have this shiny object system syndrome, right? There's something else comes up. You say you're working on a focus market, but maybe an enterprise deal comes up and then you run there and something. How do you like focus on a TAM but also. And make it larger, but also stay focused? Because as an early company you could completely kill yourself by running in different directions, right? Yeah, yeah.

You don't want to do run in different directions. You want to start with the TAM of a use case or some use case or some segment. But you can slice it by a use case, by market segment, by SMB versus enterprise, by industry, vertical, whatever you care about. And you got to do a very good job at that. Once you do that, then you expand the TAM to the next segment, use case vertical. When you then you do that, you have to keep expanding to the third use case, vertical segment, whatever it is, and then the fourth one. So that's how you are expanding. But you have to do a good job in each one of those. If you're not doing a good job in those and you kind of chase the you did your job is half done in the first use case and you chase the second one and you did 20% of the work there and then you chase the third one, then you did 10% of the work there and you chase the fourth one. That's totally wrong. So you gotta get one thing and then keep moving to it. So the formula that I have roughly used and Appdynamics and ad harness also. Now at any point of time, about two thirds of your engineering investment and product investment goes into the existing TAM that we are the existing use cases or TAM that you're addressing. And 1/3 goes into expanding your TAM. And the 1/3 that you're putting this year to expand your TAM will become next year part of your existing TAM now. And then the year after there will be new 1/3 that you will invest in putting TAM. So that's the rough rule of thumb I've mostly followed so you still have to put 2 3rd in your existing TAM and then the rest goes into expending the you getting your damn bigger.

Definitely now at AppDynamics, by the time you sold what percentage of the company was the product you started with and what percentage was new products sort of thing. Did you expand, did you add significant new products, new features? What did that look like by the time?

Yeah, we definitely did. So when you know it's app dance was about monitoring and troubleshooting your software applications. When it was like monitoring diagnostic troubleshooting systems for all kinds of software apps. So we started by focusing initially on apps written in Java as a programming language. So that was like if you have app written in Java we were the best monitoring and troubleshooting product and we focused on that. Once we did a good job at it, then we started expanding to other programming languages. Net and PHP and Python. So that's how we expanded the temp systematically on there. But then once we did that we started moving to beyond your code. Can we watch your databases and what's the impact of performance? Or like do you need monitoring and diagnostics for those? Can we monitor your mobile devices and put the monitoring and diagnostics on those? So that's how you keep expanding our time. So by the time we sold the company at that time you're around, I would say around, around 250 million ish in business. And for 250 out of 250 million, the original product which was our Java application monitoring and double shooting, that was about 50 to 60% of the revenue. And the other 40, 50% was coming from the areas that we expanded into. But now it's actually AppDynamics business which was acquired by Cisco is around 7, 5, 800 million of revenue as part of Cisco. And a lot of that has come from the products we are building. The newer products we are expanding into as well. So that allows you to fuel a lot of growth and that's the main at harness we do the same thing. You start with one area and one use case and you do extremely good job at it. Then you keep adding to the next and the next. Your time keeps growing and your you get the cross sell opportunity. You get upsell opportunities. You get like you know, you become from a product to a platform and it drives high growth and it drives efficiency in the business as well. Because the cost of selling more to your existing customer is, is much lesser than finding a brand new customer base change at all.

Like when I say change meaning you were I think at App Dynamics going after enterprise. Did that profile or change over time or stayed more or less the same? Same selling more basically upselling versus going to net new.

Yeah, the profile changed over nine years. When we started at AppDynamics, we were selling to both SMB and enterprise and our business was like a good mix of both. Over time our business shifted more towards enterprise and less towards SMB and we put our more of our energy and focus on enterprise and with enterprise like in a week as we're building and expanding our product portfolio. If you have a large enterprise as a customer and is happy with your product number one and you have an adjacent product number two, it's really easy to sell to them. And if they're happy with that, you have a new adjacent product number three, you can sell that. So then we started our focus shifted more and more towards enterprise over time. At Harness, my new company, that's one thing I'm doing differently, that I'm actually making sure that we are always very good in addressing both segments. So we have almost the rough model that you're shooting for that about 60, 65% of our business comes from enterprise, which is the large, which is a majority of it. But we have 35, 40% of our business comes from the SMB market as well. So we end. So you know, the advantage of that is like, you know you're, if you're also selling into SMB, you have to make sure your product is simple and easy for someone to get going in SMB fast. And to me that is a very valuable thing that is also extremely helpful in large enterprises these days. So it forces your engineering and your product to design products that are simple and easy and then you can also take into large enterprise and the simple and easy creates higher velocity in your. When you go to market.

Definitely your next point was build the best product in the market. Right. How do you start? Like how should startups think about building products as they go from idea to product market fit and then hypergrowth?

Yeah, I think that's a good question. And that's probably the hardest thing to achieve. Like it's easy to say build the best product in the market, but how do you achieve it? I look at is you just have to keep at it. The, the main thing is if you're an existing market, which majority of the times startups would be, you have to have a major binary differentiator in your product approach. Like when you launch the product, like if you don't have a binary differentiator is this is the Thing that's fundamentally different compared to the, the current generation of products. For this thing, it's very hard to, for you to be the best product in there. Right. So you build around those core binary differentiators and I would not even launch the product until I have it figured out that what is the core binary differentiator like, you know. So to me it's like that the entire product has to be built around that first. If you're going in a brand new market where there's not too many legacy incumbents, that's a different one. That's to me is you just, it's. You're competing against nothing, that there's really nothing. It's a brand new market, you're trying to create it. So in that one, speed is important that you want to bring as much capabilities there fast to the market because there is a pain and there is no incumbents to solve that right now. Right. So it's a little bit of a different product strategy if it's, if you're competing against existing incumbents in an existing market, you have to go with a very strong binary differentiator. There's no point launching the product unless you have a credible binary differentiator to start. If you are going in a new market, optimize for speed. Bring something fast so that before others bring it so you can start covering the gap and then go from there.

Definitely. So did you have any sort of metrics then? Because you also invest right at unusual. What are some metrics you say that the company has maybe product market fit or validated the market, then they're ready to scale, they have a differentiated product. What are some things you look for? What are those signals?

Unusual. Tell you a little bit about unusual. I started unusual with this primarily the concept of that when founders start their companies and normally it's like a small team, you are like two, three, four people at that time. You have some idea, you have some expertise in your domain that you are very and you're passionate about some problem. How do we help at that time and what I realized was like When I started AppDynamics I needed most help in the first 18 months, two years it was the engineer turned first time founder. I didn't know what to do in finding customers and marketing and recruiting and I needed a lot of help there and my VCs wouldn't provide help that time. They said I will wait until you get traction, until you get, we can't spend too much time with you until you get all the traction and by the time we got traction we didn't need. I didn't need help because I knew what to do. So I, what I found was that the VC model was almost like inverted. The founders need most help when they're just starting. Before traction, before product market fit, before the, you know that's where they need the most help. Once they have gotten those things, they really don't need as much help because they have learned it. They have figured out as founders, as entrepreneurs, as CEOs what to do. They have probably hired like VP of different functions, VP of sales, VP of marketing. So they have a team that can help them do things. So do you really need help from investors at that point? So unusual is designed to invert that that we help you when you need the most help when you're just starting. Actually it's mostly pre traction pre product market fit. So we invest when you're just starting. We call ourselves, we specialize in zero to one. So we invest you invest in you at zero and we help you to take to one. Like in a B2B world it's actually literally zero to million dollars of revenue. We invest in zero dollars of revenue and we really deeply help you get to the first million dollars of revenue, maybe million million two. And after that you learn and you get mature and we help you recruit the right team and you run from there. So it's a different model. We don't look for metrics as much. What we look for is are the founders really passionate about this problem? Is this problem large enough? Do the founders have a unique advantage and insight about that problem? Do they have some technology inside? Do they have some domain deep experience that they have the advantage to win to solve that particular problem? And are these founders committed to the long term to build something big? And that's all we look for because we normally investing in pre product market fit and pre pre traction at unusual.

When you look back to app dynamics and even harness. At what point did you say I have product market fit? Let's pour some gasoline on this.

Yeah, you know product market fit is such a, such a, like I would say so much has been written about product market fit and talk about product market fit but still is abstract concept. So I normally like to divide into two phases of product market. We call it like early product market fit and a mature product market fit. To me early product market fit I only feel there is early product market fit when you have at least hit a million or so of revenue. You know it's by until a million of Revenue or so you're just pushing it. You know, you figuring it out. You're selling maybe around half, maybe somewhere in the 500k to a million dollars of revenue. In the B2B world and consumer different metrics, let's say like you know the half a million to a million is probably when you start feeling okay, you have early product market fit. Like you can sell this thing. There is the message is resonating, the product features, functionality are resonating. People are using it, people are buying it right in. In the B2B kind of world that I've been in, appdynamics, harness traceable, it roughly translates to about say 20 to 40 customers. You have 20 to 40 customers who are using your product, they're finding value from it. You've been able to convince them to pay you money. You are in a close to a million ish ARR. That's a good sign that you have an early product market fit more than there's this the mature product market fit. The main difference in a mature market fit is bringing the go to market element into it. To get to the first half a million, now to a million, you are just brute forcing the go to market. You're finding the leads whichever way you want. You're finding like your, you have your SDRs and BDRs and whatever marketing functions are working and you find you're figuring out is there a market and is there's your products all that need the second phase of it. The go to market is very important. Your product has to be designed to meet your go to market. Do you have a freemium model? Do you have an open source strategy? Do you have a marketplace model? How do you drive your your growth? And normally in my experience that comes to. You have to feel confident that your go to market is running that you've figured out are you selling into enterprise or you're selling into sms, SMB or what is the mix of enterprise to SMB? You figure out are you selling direct or you're selling through channels. You figure out are you going to sell through inside sales or field sales, all of those things which is like the go to market part and that people think of go to market and product independently. That's not how it works in modern software companies in my experience now. So you have to bring the your go to market strategy and your product market fit and that's when you have a mature product market that fit that you've figured out. This is how we generate leads and this is how we do our, our Sales motion. And these are the kind of salespeople we hire or these are the partners we sell through. And it's all working as a sort of a smooth machine and you can press the gas from here and scale, that's to me is a mature product market. And for most companies, you know, for, for app dynamics and hardness, I had that feeling only once we hit like around somewhere in the five to $10 million kind of revenue that by that time it was clear this is how we're going to be. Our sweet spot is this is how we're going to sell it, this is how we're going to excellent. And then you are ready to press the guess. Then you want to move fast and go and try to capture as much of the market. Definitely.

There's some great nuggets here. I'm typing them as I go along. I usually don't live type very rarely and this is coming from the heart and I love it. So when you talk about mature product market fit and adding the GTM as a part of it to get to 5, 10 million because this is a very important thing. I had an advisor in my previous company that failed. He asked me to see the marketing plan. I put this marketing plan with so many channels in there. And then his name was Hiten Shah. He sank in the seat and he said, just burn these slides. He's if you don't focus on one thing, you're going to fail. You're chasing like somebody saying implement hotspot, somebody saying be on social. You're running. So what does that look like when you got to 10 million app dynamics, how many channels were activated or because a lot of advisors will come and.

Say, hey, I don't see Clubhouse.

And then founders sometimes will go and run to Clubhouse. What does that look like? Is it one channel, one customer or is it.

Well, I think you've got to be a little bit more, more analytical about it in my experience. Like numbers and measure it. Especially when it comes to marketing. You can measure it. It's easy to experiment. Let's say someone says hey, you should have ads on LinkedIn or maybe you should be in on Clubhouse and that will drive leads to you. So you experiment with it. You put in maybe spend like a, you know, thousand dollars to put some ads on our campaigns on LinkedIn, let's say and experiment and see what the results are and was it working or not. And then you increase on things. So I think experiments are totally fine. But your investment should be driven by data after that marketing, otherwise you can burn so much money and so much dollars when it comes to. So obviously there is a brand. Right brand is a little bit un. You can't measure easily the what will drive brand. Right brand. You have to create your share of voice you are in offer for your company or for your business. But when it comes to generating leads and demand in business, the more measured and analytical and numbers oriented you are, you know, the better it is. And I would strongly encourage hire people in marketing who numbers people on that front you will have like a lot of great marketers who can't understand the numbers and the and the like what will drive leads and like I've put in $10,000 into this channel. Would it generate me this much leads or not? That's how you have to operate that and it's you know, you won't know. Like every business is different. Every company is different. What would work to drive your leads is you experiment quickly and then you double down on what's working and you measure and measure and hold your marketing org accountable for that.

Definitely. No, that is well said. So then does the same principle apply because you said 2/3 this TAM, 1/3 the next TAM. So you 2/3 you just. Basically what I'm hearing constantly is nail it and then scale it. So maybe 2 3rd scaling the chat. Maybe spend some time figuring out the next sort of. Let's go into the next point. You had mentioned GTM and sales execution. I want to cover all your points because it's super valuable. What does top GTM and sales execution look like? When did you at AppDynamics decide I need to I've done founder sales enough, I gotta find somebody else. And what does that look like?

Yeah, I think that's the I what I realized was like selling into enterprises is there is a science to it and if you don't know it, you really can't be very good at it. So I my advice to most founders is try. If you don't have experience with sales, try to bring in someone who has experience with it and then learn from them or let them do it. Someone who is really good at it. When I was doing Appdynamics people would be like, oh, don't hire a VP of sales. Hire a sales rep to do things. And I was like I can, but I don't know what to do here. I don't even know how to hire a sales rep. I don't even know how to interview them at the right now. So I would rather have someone who has done this VP of Sales or this job before. If I can afford to like if you have you have funding to afford to bring someone. My advice to most founders is try to bring someone who's the the most capable, most experienced and ideally who have done that job before in another startup. You know, if some then you are reducing the risk on it. So that's and I in hindsight I feel that was the best decision I made that I when we were like very small at AppDynamics first five customers which I did founder sales I was like let me try to bring in someone who has done this job before. And I was able to bring someone as VP of sales to do that. And that really helped because that's. I was able to build a strong sales function. But at any point of time like once you have to make sure that you do you have the the right people in sales leadership. Do you have the right people in your. You know are they doing sales execution? Same thing on the marketing. Like it's this alignment between marketing and sales. Do you have the demand generation models working and you have to when you say okay how do you do world class job at it? I the bar I look at is I used to what what I normally go and tell our salespeople in that is imagine our product is bad. Our product is not a good product. Can you sell just on the strength of sales that our sales execution is so good that we could still find a lot of deal sell. By the way I say the same thing to the product team. I said imagine our sales sucks. Can we sell because our product is so good that people will buy because that imagine our sales is really bad and can you sell just because our product is so good. And that's to me then it becomes both becomes your competitive advantages. Both are meeting that bar like in our product is shooting for imagine our sales is bad but our product has to be so good that people will still buy and our salespeople are shooting the bar for imagine our product is bad. We are so good in sales execution that we could still sell it. Then you ha. You have achieved a very. It's a multiplying effect of it is very high. So you have to push for it. Like you have to try to hire the best experienced sales leaders. You have to create the culture of encouraging them. You have to provide them the right resources. You have to A lot of companies and startups I feel under value focus on sales and marketing and it takes some time to learn. You got to focus on that and you can build the best product but without it, without good sales and marketing, you still aren't going to get in front of everyone. That it all comes down to focusing on that definitely.

Now when you hire people early on, there are times you run into situations where they were the right people for the company at that time, but then you outgrow them. Maybe your first VP of sales you have outgrown. How do you handle situations like that? How do you have that conversation? Who do you bring at the right time at series A B?

So I would say the hardest thing startup founders CEO have to do is that is one of the hardest decisions you have to make. And you make and you have to go through those transitions. Like the people who are like you hire someone at say zero to a million dollars of revenue and say VP of Sales or VP of Marketing or VP of Customer success or all different kind of functions, many of them would not be able to scale after say 10, 15 million of revenue. And someone you hire at some would, some would and you want them to some that you hire a 10, 15 million of revenue may not scale beyond 60, 70 million of revenue. So the main things that change is like when you're very early, it's all about how fast and scrappy you are when you are getting bigger. You also want ability to plan and have the right strategy because you are fast and scrappy, but you have a wrong plan in place. You're basically churning a lot of energy and resources, right? So the skills start to change a bit and ability to recruit becomes a big skill as you grow. So it's just different things. And as CEO is it's really hard. You hire someone who has worked with you in the trenches for say three, four years and you've achieved to a certain state and for making the decision to bring someone else and change them, that's a very hard thing to do. But as startup CEOs you have to and you and there's no formula if someone is scaling or not. Like how do you judge it? And I look at what skills someone needs to get to the next level and do they have those skills? Are they coachable on those skills and do we have a time as company to coach them? We need those skills now and it will take a year for someone to be good at it. Do you have a year to wait as a company that becomes a factor. It's hard and sometimes you have to make very hard choices. These the people you work with, they become your friends also and it's replacing them with another exec is the hardest.

Thing to do what? Any advice there on the type of conversation or how do you frame it? Or sometimes they know already and maybe other times they feel like, hey, I.

Was sliding, you know, Sometimes they know. Yes, most of the times they would know. I would say it's important to keep having the conversation on what is what we need as a company and also point out like, you know, what we are not getting as a company and you give them a little bit of a chance to get there. If they're not getting there is when. Because you don't want to do this lightly as well. You don't want to keep bringing new execs. So you want to give your current exec chance to get there. And how long of a chance you give depends on the state of your company. If you can't give someone a year to fix something because if in a year your company won't survive, but in some cases you might be able to give up, like in a shorter time, longer time, whatever. I think you just have to be open and upfront and it's. There is no easy way to do it. Like you can't be beating around the bush. You have to. When you have to make the. You. When you get to the decision, you have to be firm and decisive about it. That's really the advice I would, I would give to someone. I think for most execs you want to look for people who make things look easy. If they, you would know like, you know, if they're drowning in it, they can't cope up with it. What's the current state of it. So then they were good in up to now, but now they're just really drowning in it and it's it and the organization knows, the rest of the company knows, the rest of the team knows. Like, you know, this is a function that's struggling in some ways. So it's never a surprise to the company. In my experience, like, you know when, whenever you do that. Yeah, definitely.

People can see the. You don't have to ask what the person is doing. You can just watch the actions and tell the story. So then as you see, these companies go from sort of idea to product market fit to mature product market fit and then hyper scale. What do you recommend for recruiting? Who at the seed stage do you see are the most important players to have? And then the next phase of scaling. Who did you bring on?

Seed stage is all about product to me. You have to have the right product managers. But the product managers in my advice should be the founders. So the founder should be the product. If you don't have founders who have that skill set let's say then you have to hire someone because if you don't have the right product management discipline as the as founders or you hire and bring the right people you're not going to go anywhere. And then you have engineers who will build the product. That's really the. You really need very solid engineers. People who can move fast, they can wear multiple hats. They are they're not bogged down by process etc. They're self motivated. That's the kind of engineers you need in early on. And the third thing I what I like to bring is at least one person who can get me in front of customers. Either the founder have that capability themselves or someone who can just. I really don't need to them to do anything in the meeting. I just need to get the meetings so as the founders as who are the product managers can have a lot of customer conversations. So you can do the find your product market fit etc. At Unusual we offer that as a service like we that is the one of the key service we provide as part of Unusual because I always struggle with it People will when I started people say you have to find you have to talk to 75 customers so that you can build the right product market fit. I said how do I get 75 customers to talk to? I don't have you know I don't have that many people I like. How would I find in a bank, in an IT organization in a bank someone to talk to. That's where that unusually offer that's we provide as a service that we will create a machine like that will call these people and get you these meetings so that you can talk to and find the right product market. So I really think only these three things are needed in the seed stage. And most B2B companies like the product management discipline who like what product to build and ideally founders should have IT engineers and someone who can get you in front of customers so we can build the best product product and find the best product iterated find your design partners etc. Everything else I would delegate and outsource out like operations and finance and legal and HR. Like you shouldn't hire people at that seed stage. There are enough outsourcing options to do that. As you start scaling beyond that at some point I think the once you have that initial product market fit start to happen. One million yeah bring sales. My advice to people is try to bring the most capable salesperson you can attract at that time. And who has gone through that stage before because you are reducing the risk on your business the most by so that's the person I would say bring. Then marketing is next. Depending on what kind of company you are in, you may need very strong marketing support. So I'd bring in a head of marketing. I would say then you can wait for the rest. My advice to most people and what I like to do is you can bring. If you don't have the engineering management experience in the founding team, then bring a VP engineering. Once you are like maybe 30, 40, 50 engineers before that you don't need a VP engineering. Before you have a smaller team engineering team than that you bring in a VP of customer success kind of person. Once you have 40, 50 customers, you most likely don't need someone. Your engineering team and product team can do the do that you don't need a VP level person and then you go from there. The finance and HR and operations, you can wait until you are even bigger and then you start bringing the execs and team and leaders in those later.

So if the founders don't have then the engineering management experience you would still hire maybe like a director level person for a small engineer.

I think if founders don't have it then you have to like someone in the founding team has to manage your say first 10 engineers. Right. You know, if they, it's. If any of the founders don't know how to manage the 10 engineers, then yes, you have to bring someone definitely.

Because I want to dive into this. It's a very important skill set for founders to have Product management. What is good product management discipline? Because some founders sometimes, especially if they're coming from a non product or engineering background, sales background, then they say build this and then build this and it's just the scope creep keeps happening and so define good product management discipline.

Yeah, it's a good question. I think to me product management, the core of product management always comes with the product instinct. I have learned that like you know it's not that product management you can, it's not completely mathematical that you can just teach to anyone and they become a good product manager. So you have to have the right instinct of what good products mean. And a lot of it comes from putting ability to put yourself in the shoes of your consumers, your end users. Can you understand from their, from their perspective what things will look like A lot of times come from your domain expertise. That's where say if you, if you are domain expert in something that you have feel. Felt that pain, that pain you can understand that you can put yourself in the shoes of your users that create your strong instinct on what a good solution to this problem would look like. Because you're putting, you're thinking in from the point of view, from the end user of the, of the consumer. So that's to me is the foundation of it. You can teach everything else but this you can't teach. If they don't have that instinct on what good product would and good experience in this particular problem domain would be. They really can't build good products. So that's the. To me is the first part now if you start becoming like mathematically like a bit like it's a more organized and scientific about it. Like, you know, how do you prioritize what to do and not change the next shiny thing here? And there's. So I like to use a sort of a framework, mental framework, which is there are four things you need to, to look in your, you know, your backlogs or what you want to do. It could be a very simple spreadsheet initially or something. I look at there, there are four buckets of things. One is what your customers are asking for. So your customers are asking for. I have, you have this feature, but I need this feature. I can't deploy it, I can't use it, I can't get much adoption. I can't do. That's like the one bucket of things. The second bucket of things is what your salespeople are asking for. Your salespeople are saying like if you don't have this, we can't sell it. We have this deal coming in, deal needs this feature or this competitor has this feature and we don't have this and we can't sell it. We are losing these deals, et cetera. So that's your second bucket. Your third bucket is what your engineers are asking for. Your engineers saying, hey, we have this scalability issue or we have this architectural problem here and we need to rebuild this and otherwise we, it won't work and we'll have production outages to all sorts of things. Like, you know, and it's like technical debt. You have technical debt that is accumulated that your engineers want to work on. So that's the third bucket. The fourth bucket is really actually not coming from these is coming from the product management or the founders. What is the vision of your product? Are you making progress towards the vision of your product? And you have to have a, like, you know where I say this is what you wanted to build to solve this problem and you have a Conviction and vision around it, you still have to keep working towards it. So I look at, you have to get a balance of these four in a pretty organized manner and create a healthy tension around it. I like to manage it in appdynamics and harness and traceable. Like this is your four lists. Like these are the ask from customers, these are ask from sales, these are the ask for our technical debt and this is what we need to do. And some of that has come from just the founders or product leaders convictions on where the market is going and what we need to add to expand our time or add features to be competitive, et cetera. And you always create those four and you go through a balance of which ones you want to take on and what compromises you have to make if you take more of this versus more of that. And that's where the science of prioritization and product management will come in. And that's where the discipline part is. Like the right founders should have some discipline around balancing this well and not just chasing things.

Definitely, Most definitely. And I love how you put it now is the balance like 25, 25, 25 across the four. I actually like that I'm going to use it at my company too. Great advice. But how do you balance?

You know, it could be 25, 25, 25. It could also be sometimes it could change. Like sometimes losing so many deals to our competitors because we don't have have these capabilities. And maybe so the second bucket of what your salespeople need to win against those deals and competitors, Maybe that takes 70% of your bandwidth for some period. And maybe you are like losing your customers are churning because your customers are unhappy about something and you want to put a lot of your focus on the first bucket because if you don't do those things, your turn is very high. So it's always not 25, 25, 25 like that. But yes, over a year period. It should be around that. But in you may have like periods of two months, three, four months where you're putting a lot of your energy and resources in one of the buckets based on what's, what's happening.

Definitely this is a good segue into your fourth point here. Take care of your customers. How do you take care of your customers?

Deliver them what you promised to me, that is, it all comes down to that. If you deliver what you promise, you really take care of them. And I always tell our teams anyone who's buying from a startup, they are putting their career online on the line by making a decision to buy from you. Like say if, you know, it's if, say if someone in a company bought software from AppDynamics or harness and we are a young startup and not too much maturity in the market yet, et cetera. If it doesn't work for them, for their company, that person may lose their job or may not get a promotion or may get like a bad performance review or they may not meet a OKR or something. So they are putting their job and their career and maybe their reputation online buying from us. So we have to make sure that we do the right thing for that person that was buying from us. And a lot of it comes down to we deliver what we promised on what they wanted to achieve in AppDynamics. We eventually got to the point of making it systematic and same thing we are, you know, doing at Harness as well in our sales process. We will do a quick analysis called like business value analysis. This is the business value you're going to get if you buy AppDynamics. We'll say this is how you do things now and this is how things you could do with AppDynamics. And this is the value. Maybe you can quantify the value, et cetera, everything so that every company does it. You build ROI and all that things. And we were doing like a business value analysis before the sale, but we also started doing like, you know, after the sale, like six months after the sale we will go and say, okay, let's do analysis of business value realization. Did you realize the value that you thought you would? And it's our job to jointly get you there like for whatever reason. If you want to realize that value that you thought efficiency or productivity will go up by this or our like you know, time to do X task will go down by this or whatever it was. Right. The value you thought you will achieve, have you achieved it or not? If you've not achieved it, it's our job to get you there or help you in whatever ways to get you there. And if you get your customers to achieve the value that you promised or they wanted to, you have taken care of them. I think at that point they are good like they were. They will get a promotion in their job. They will get. They could be your advocates, they could be a champions and that's that to me is the way to get there.

Now coming back to the last point, tell us about building that winning culture. Focus on the right culture and the company.

Yeah, I think. Well, I don't think there is one culture that is necessarily the winning Culture you have to as my main belief is that as founders you have to be a bit deliberate about culture. People go and say culture is what forms, like you can't shape it. But I don't agree with that. You can shape the culture. You have to be like, you know what kind of culture you would like. If you look at Google, a very different culture than Amazon or very different culture than Apple but they're all successful companies. But you have to have what you, what culture you want to create and be deliberate about it. So the culture that I like to create is that it's, it's very open and it's very collaborative, it's very data oriented, it's very transparent. We are ambitious, risk taking kind of culture that you shoot for big goals and, and be very open about it. If you don't meet it, it's fine. We just are open and transparent about it and very empowering as well. You know, just empower people. You hire smart people and let them run the things but you create transparency and accountability and measurability around all of those. So that's the culture that I like to build and that's the culture I would like to operate. It doesn't mean that is the only culture that could, you know that that would work. But that's the culture for me. The ideal culture would be the thing I do like to do is a lot of people talk about how do you find culture fit when you hire, are you hiring a lot of people? How do you interview for culture fit? And I tell our teams don't interview for culture fit 100%. That whole concept of interviewing for culture fit like HR person asking someone like oh, would you fit our culture? To me is that just nonsense? Doesn't make any sense to be can we teach them to operate in our culture? Are they coachable? If someone worked at Apple, they worked in a very different culture is very secretive this and that. If someone worked at Google they work in a very open culture. So how would would you judge them that what culture they are from that person is from? No, because that's the company they work for. That was the company culture. So now when we hire them at Harness or Appdynamics to me it's not about what culture they previously worked on. It's like are they ready to be to learn and embrace and adapt, Harness culture and the interview process, we tell them that this is our culture is so for you to be successful at Harness, these are the cultural values or this is how we operate and you teach them and you teach them and you educate them again and again. And people like to operate that and you exhibit it. People who do these cultural values are the ones who are getting promotions or the ones who are getting like more responsibility etc. And people will just adapt your culture. That's how you strengthen your culture more and more over time. Definitely the other day I put a.

LinkedIn post where it almost went viral. I put culture fit is the biggest BS trope in the history of business. You don't need to hire people that you can go drinking with. You need people to align with your values. There's a couple of questions here want to Take is is one on your, on your revenue at AppDynamics, did you how did you think about shifting pricing strategies to get to 250 million ARR at AppDynamics?

We didn't really shift it. You want to. The one mistake I feel startups do is to price too low. So one thing I would say, if you want to build a big business, don't price too low. Create value and create a way to justify value. And then I started AppDynamics as an engineer and first time I was like asking someone for a million dollars, like I would be just scared of even thinking about it. How can we ask for a million dollars? But if you're selling to a large bank, where have they $10 billion of it budget and you can help them save like $100 million a year or something like that. Asking them a few hundred million dollars is a very justifiable thing. So you have to almost make your pricing align with the value that you will create for someone and it's people will pay. If you're gonna save someone a hundred million dollars, can you ask for $2 million a year, $3 million, $5 million a year, can you justify the value you probably you can. So you have to create the pricing that is aligned for what the value people your customer perceives. And that would be my one advice on the pricing. It's not about changing the pricing. You just have to align your pricing with the value someone is going to.

Get out of it. One of our most regular attendees, Akilan asks, how have you. How did you attract your seed investment for App Dynamics? How did that happen?

It was hard. It was hard. So in those times the definition of seed was different. Like you know what we call seed today was called Series A. That time it was $5 million. Series A. These days 5 million is a seed investment. But it was very hard. Like I was a first time Founder, founder, engineer turned founder. I pitched to at least 30 or so VCs. Most of them turned me down. At that time, people were like, you are sole founder. We don't invest in sole founders. Or you don't have any business experience. We don't invest in that. We think the market is too small. All kinds of things you deal with and which is okay. All of those rejections, you learn from it. And it took me like almost 30 rejections before I got my first term sheet to do that. So it wasn't easy to get the first funding for App Dynamics. First funding for Harness was extremely easy. Like I had 30 VCs pitching me, take our money, take our money. That was different story. The App Dynamics wasn't easy.

And in a way, as a founder, you're doing sales as well, right? Like you're selling, pitching to investors, leveraging your network, cold emailing. We're at the top of the hour. Do you want to pick one question here? There's so many questions. I think a lot we covered as we went through your journey. But maybe you pick one question you like here as speakers pick. Sure.

How do you do equity valuation when Pre sales from 0 to 1? Yeah, let's take the valuation at that stage from 0 to 1, pre product, market fit, pre traction. Anyone who tells you that there's a numbers equation behind that is just bullshitting you. There is no, there is no numbers thing at that point is investors want to have a certain ownership in the companies and then beyond that is just demand supply, how competitive the deal is, how much interest there would be in that particular company, that particular founding team. But you really don't have metrics. And I almost think like any investor who's too focused on metrics in the 0 to 1 stage is really not the right person at that stage. You have a lot of investors who are focused on a lot of metrics from your CAC ratio and all sort of things. Right. They don't apply in zero to one. Zero to one is all about is the market problem important and large do you have the product market fit and the right product differentiation to address that? And is a team good? Is team strong? Is this the winning team? So that's what people would investors should be looking at, nothing else. Metrics doesn't matter in the 0 to 1 at that point. And then you just, you know how competitive the deal would be. So if you're a founder and you want to get the best valuation, make it competitive, don't, you know, pitch to more investors, get More offers don't make it just one or two. The more competitive it is, the likely the higher valuation you're going to get.

Definitely one question here was what does unusual look for? And I think, I guess is that why you named the company Venture Fund Unusual? Because you are unusual in a way. Single founder, full time entrepreneur.

Well, that is part of it. There is a bit of. But it's not that because Unusual Ventures is unusual. Our approach is unusual. You know, our approach at Unusual is to really help founders in that zero to one stage. And we almost specialize in that by providing very deep help in that. So if you take capital from Unusual, we provide. We become your acting VP of sales, we become your acting VP of marketing, we become your acting VP of recruiting. So we help you with the functions. You don't likely have experience as founders at that stage and you don't have the ability to recruit those people at that stage because they don't want to join you. And now like how would you hire a good VP of sales before you have any revenue traction? So we become your acting VP of sales at that point so that we can get you to the revenue direction and which is a very different model than any venture fund. And I wanted to do it based on my experiences myself. Like what would I gotten most help out of Adaptynamics or harness or from VCs at that stage. It's like someone just gets in the trenches and help me things and do things that I don't know how to do well or I can't even hire people to do that well at this stage because that will change our trajectory significantly. So it's a very unusual approach and unusual model and that's why we call it unusual. But we also look for unusual founders. That's also part of it. We like high diversity, all kind of backgrounds. We don't follow like one any kind of a specific formula. So that's definitely part of our model as well.

Yeah, definitely. So do you invest in post product sort of pre revenue startups at all?

Yes, we do.

We do. So we look for there.

Well those ones, yes. The post product, post early revenue we look at still we are looking at the product market fit. We're still looking at the team, we're still looking at the market opportunity but at that point you start looking at all also the ability to execute. What are we seeing? Like are the customers happy? Are the. Is the founding team learning to execute on go to market and sales? Because the best founding team will be like extremely good in the product and their domain but their ability to learn go to market and sales. That's the so if you're starting to get there you want to see that is this team exhibiting those signs and you start seeing those if the and normally our sweet spot at a new zeal. We normally invest only in like seeds or like early Series A's. We don't do beyond that. We don't we are growth investors.

Awesome. It was a great session. It was pretty advisory for me as well as I aspire to be here. As you look back on your journey, what do you wish you did more of and what do you wish you did less of?

I'm pretty let's say in many ways content on the journey on it I would say When I started AppDynamics I wished I had better understanding of investors and VCs and managing board and I spent a lot of time doing that. I wish I didn't have to. I like to spend time building products and competing in the market. Not too much on the managing your investors and board et cetera. So that's something I wish I had to do less and I'm doing less of that now. So that is good to me. It's what my passion is actually product. I like building good products like excellent products and going after markets. That's what I thrive in. So I would like to do want to do more and more of that that I could build really good products and and build more products to the market that solves pain and problem areas that I'm interested in. That's so that's what I would want to do more and more.

Definitely. Thank you so much. Jyoti. You're such a humble human being. You're one of the best entrepreneurs I met. Wishing you great success. Wishing you many more unicorns. Not stopping at Harness but traceable and everything else. Thank you so much for joining us. Have a wonderful weekend coming up.

Always great to talk to you. I need some traction.

Thank you for listening and we hope you enjoyed this week's episode of the Traction podcast. If you enjoyed the show, please leave us a five star review and you can find more information and all the resources mentioned in today's episode at Boast AI that's B O A S T A I forward slash blog.