After Marketo: 10 Things I'm Doing Even Better The Second Time

Thank you for joining us for our second session of the day. My name is David Apple. I'm the head of the software and SaaS vertical at Intac, which is the world's largest independent pure cloud ERP firm. And we got a great session for this one. This one's all about after Marketo, what I would do the second time. This could be moderated by Doug Pepper. Doug is the managing director at Shasta Ventures. Long time vc, some great companies, just two of them include Optimizely and Flurry which was acquired by Yahoo several years ago. And then John Miller who is co founder of Marketo and this is his second firm, Engagio. As we were prepping, it reminded me of a story some of you guys might have heard. Sir Richard Branson wrote letters to himself, his 10 year old self, his 20 year old self, his 30 year old self. What we get the benefit of is John essentially writing a letter to himself about what he would do 10 years ago that everybody in this room can apply to how you build a great business. Big fan of Engagio, a lot of Shasta Ventures companies on intact. And with that I'm going to introduce Doug and he's going to introduce John.

Appreciate it, appreciate it. Hey everybody. Thanks for the intro. David. It's great to be here. As he said, my name's Doug Pepper. I am a managing director at Shasta Ventures. We are an early stage venture capital firm. We look for category creating companies both in enterprise and consumer. It's a great honor to be on stage here with my friend John Miller. We actually go way back, we were in business school together in 1999. But I had the real pleasure of investing in John when he was the founding CMO of Marketo back in 2006 with his partners Phil Fernandez and Dave Morandi. John won't brag about himself, but he is a very unique marketer all at the same time. He is strategic, he's quantitative and he's creative and he really helped pioneer the use of content marketing and B2B marketing. But more than that, what I think is so special about John is that he doesn't just market a specific product or even a company. What John does is he focuses on defining and creating categories and then building the leading company within that category. Obviously at Marketo he was very successful in doing that, building the company from the ground up, helping establish the marketing automation category. Ultimately they took the company public in 2013 and then sold it last year for $1.8 billion. And now he's doing it Again, he's doing it again with Engagio in the account based marketing space. He's helping to establish that category and then ultimately building a leading company there. But this time he's doing it as a second time founder. And I just think it's an amazing opportunity for all of us to have him share with us what he's learned over those many years of success and how he's applying those learnings to doing things even better the second time around. Engageo. So this is really the John show. He's going to do a 20 minute presentation, as you'll see, and then we'll sit down and do about 10 minutes of sort of Fireside chat. Q and A. So John, thanks for being here and take it away.

Thank you. Thank you for the kind words. All right, so as you heard, I was one of the co founders of Marketo. Apparently somebody told me the other day that I'll know I've actually made it with Engagio when I no longer need to be introduced as the co founder Marketo first. But I have been in marketing technology my whole career. I am a marketing technologist. But more than that, I'm also a father. These are my two kids. The fun fact is that my son, who's obviously the older of the two here, he was actually born the exact same month that we incorporated Marketo, which has made it really easy for me to keep track all these years of how old Marketo is. They both turned 12 this month, or 11 this month, in case you're following. Another fun fact is that I was actually born here in Ethiopia or what's marked here as Eritrea. And when people hear this fact that I was born in Ethiopia, I often get the exact same question, which is, hey John, why were you born in Ethiopia? I always give the same answer, which is that I wanted to be close to my parents. That has nothing to do with marketing technology or SaaS or entrepreneurship. Of a little bit more relevance, and Doug alluded to this is the fact that I studied physics for my undergraduate degree. I actually spent my summers doing fusion research at the Lawrence Livermore national lab. Got into MIT for a PhD program. But I wanted to give this whole business world a try. I deferred MIT to go into management consulting and then very quickly into marketing technology from there. And I haven't looked back 23 years later. But I don't regret the fact I studied physics. I think that quantitative analytical way of thinking has helped to guide my career both as a marketer and now as a CEO. And I Think you'll see that through this presentation. So what I'm gonna cover is just briefly, kind of the history of my story from Marketo now to Engagio, and then hopefully cover the key things you guys came here to see, which is the 10 things I'm doing differently. And then I'm excited. The best part is getting the conversation with Doug. So to set up, what is this new thing that I'm doing at Marketo, we built a revenue engine where marketing was generating 80% of all the deals the sales team closed, which was using content and inbound marketing techniques, and then our own lead nurturing, lead scoring. And it was wildly efficient, and it drove a ton of growth. But what happened was around about a year before the ipo, the cfo, Fred Ball, came to me and said, hey, John, we want to invest more to grow even faster. How much faster can we grow? And he came to me in marketing because we were driving 80% of the pipeline. And the problem that I had, or we had, was it's not like I could just write more blog posts and suddenly generate more leads. I needed to find new ways to grow Pipeline beyond this other thing that was working, but it was kind of hitting its maximum. And so we identified a list of target accounts that we really wanted to get into, and we started reaching out to them proactively. And I realized that there's two different styles of go to market here at play. What we had been doing at Marketo was fishing with nets. We didn't care which company responded. We just cared, did we get enough? You know, but this new thing we were doing is much more like fishing with spears, where we were not waiting for them to swim into our net. We were reaching out to them proactively. And that was the genesis of the idea I had for Engageo. Marketo and the other marketing automation tools are great for fishing with nets. And I started Engagio to be the platform for fishing with spears. So, you know, after the ipo, you know, Marketo stopped kind of feeling like my company. You don't leave the company you founded when it's your own baby. But eventually it got big enough. It stopped feeling like it was mine. It started feeling just like it was a job. And then that kind of set in the motion the desire for me to leave and then actually go pursue this new thing. So I left in February of 2015 and then formally started the company on PI Day, March 14, 2015. So we're only a little under two years old now at this point, but we've had an extraordinarily fast start. I'm very proud of. We've signed up over 100 customers and are currently at about 2.6 million of ARR, which is not a huge number compared to a lot of the other people on stage at this event. But for basically selling the product for one year, I'm very happy with that. And in order to achieve that success, we did a lot of the same things that we did at Marketo. I know this presentation is about 10 things I'm doing better, but the reality is Marketo was a success and a lot of the core things are the same. I think perhaps the most important thing that we're doing the same is we identified a great market. Some people give me credit for creating marketing automation or creating this idea of account based marketing. That's not true. What I did is I saw something that was existing and then I helped to define it and then I helped to amplify it. And in so doing, yeah, a lot of the credit does go to my companies. But the key in both cases, when I sort of saw that there's a good opportunity for a company, was a category that had existing buyers with existing competitors, but the competition wasn't so big and so strong that we couldn't come in and ultimately, you know, win by kind of executing well. And those are the markets that I like because you don't have to do all the category creation, you can instead do this category definition and bring that to you. So great market number one. Number two is pretty obvious. You have to build a good product. Thank you to my co founder, Brian Babcock and the rest of the team, you know, for that. And you have to have great sales and marketing execution. So, you know, we are kind of, you know, eating our own dog food or as I like to say, drinking our own champagne, driving high velocity sales deals and growing the business. So great product, great market, great product, great execution. Those are givens. That fancy transition there is called the vortex for any PowerPoint nerds. So what are the things I'm doing differently? You know, in a nutshell, you know, at Marketo we built a great product and, and ultimately led to a really good outcome. But I don't believe that we built a great company and I think that's a really important distinction. So Patrick Lencioni, I'm a big fan of his writing and his work. He talks about companies that are smart and companies that are healthy. And I truly believe now on my second time that a healthy company with average smarts will beat A, you know, kind of an unhealthy company, you know, sorry, a super smart company with kind of only average health. Did I get that right? I got that right. So, you know, so number one thing I'm trying to do different here is really focus my time, my energy on building a healthy company. So, you know, the first thing that I'm doing there, I mean, there's a bunch of things is kind of core values. And it may sound like motherhood and apple pie to define your core values, but the reality is it matters. And at Marketo, we didn't define core values until we were about $20 million of ARR. And what that results is, effectively we had, you have a culture, you have things that evolve, but it was actually kind of balkanized with different groups and different teams having different sets of values. And that ultimately made it hard to row in one direction as a coordinated team. And Marketo suffered, to be honest. I think as we got bigger because of that, especially after the ipo, in some ways it made it hard to retain people. Before the ipo, there's a lot of drive towards, oh, we have this goal. Everybody's excited for this particular moment in time. On the other side of it, if you don't have kind of strong values and that strong culture, it definitely made keeping people a little bit harder. So at Engagio, my co founder and I defined our core values literally before we incorporated, just in very first stages, when we were still talking about how we're going to split up our founders equity. As a sidebar, we have three couplets as you see here. For some reason, that's a hell of a lot easier to remember but than just lists of five or six values. Second thing I'm really focusing on is with my time is teaching my team how to be a good team and how to work effectively again. Relying on Patrick Lencioni here at the core is just literally building the team trust. Because if you need the trust, when that's there, then what you can have is you can actually start to have debate and in some cases healthy conflict. And if you don't have a team willing to call each other out and kind of push each other honestly and candidly, you're going to be sub optimizing. So trust and then on top of that, the ability to have conflict from there, you need to then have clarity and commitment. So once you've all decided what you're gonna do, you have to make sure it's super clear and everybody's aligned against that. And now you're all moving in the same direction. We've implemented an OKR process, which I think a really key element for making sure that happens. You need to make sure that your team members can work on making each other accountable. So it's not just my job as the CEO to go to somebody and say you're not doing well enough or you made a commitment on that OKR and you're not achieving. The whole team calls everybody out on that. And then ultimately that works when people put the company's needs before their department's needs, before their own personal needs. So really trying to push that into my team and hope that they push it down to their team. Now, once you have clarity about what you're trying to do, once you have your core values, you need to then make sure that gets pushed into every operational process, whether that's hiring or onboarding or even how do you do raises, how do you promote people? All those processes need to reflect the way you've decided you want to run your business. And I'll be honest, that was overwhelming to me when we were small, just how am I going to put all these processes in place as a little startup with a hundred other things on my mind? One of the smartest things I think I did in the history of Engagio is I pulled together what I called a culture day and we spent the morning talking about our core values and what stories share those values, what is our shared mission, what meaning do we get together from working here? And then what we did is we did a brainstorm around our ideas, around all these topics. But then to actually put that into execution, every person had to sign up their name against one of these teams. And then we held those teams accountable for actually putting these processes in place. So as a fairly small company, we were able to build fairly mature processes around building a healthy company. Now the challenge I have is we've grown a lot since last July when we did that. We have new people, so we have to figure out a process in place for continuing to refresh that. We're going to do it again on our second year birthday in March. The last thing I'm really thinking about in terms of healthy companies is fairly tactical. But how do you have a good meeting? I don't know about you guys, but whenever I've been in a job marketo, even earlier when I fantasized about quitting, it was almost always I was in some meeting where something is just boring and there's a reason why so many people check their phones and bring their laptops to meetings. Most meetings suck. And so we work really hard at teaching our company how to have good meetings. And the number one thing that makes a meeting good is debate, right? When there's some conflict going, when people are like, I don't agree with you, you're wrong on this. But still, based upon that trust, that's when everybody puts their phones down and starts paying attention because this is exciting, this is good. And you want that debate and conflict going because you're going to get a good decision on the other side. All right, a couple other thoughts on the things I'm doing differently. First of all, fundraising strategy. So in less than 18 months, I raised $32 million at Engagio, which is almost as much as Marketo raised in four and a half years. So you would think, wow, that's amazing that you kind of raised all that money. The problem, though is in order to not get diluted to hell, we raise that money at fairly high valuations, which is a nice thing you can do as a second time founder, but that big money, eventually I'm gonna need to raise money based on real metrics, not just based on the fact that I'm being a second timer. And so I need to make sure that the money lasts just as long. I need to get just as far in terms of ARR and growth and other operational metrics on the same amount of dollars. Right. So it's not like it's any better to have more money. It actually means you have to have that operational discipline in order to make sure you're still achieving the same, well, you know, achieving the same milestones you need for the same amount of dollars. We've been pretty efficient, actually. You know, I haven't. You know, my first raise was 10 million. We're still spending that. We actually haven't even started to touch the second 22 million. And right now we have cash through the middle of 2019. So it's good to have lots of money, but you still have to have the operational efficiency. The benefits to us of this strategy are less dilution, less risk. The world could blow up. Who knows what's going to happen? And so the fact that we do have a big gang account gives us strategic flexibility. And lastly, less distraction. I'm going to be able to go for two and a half years without thinking about fundraising. That's actually a really nice thing for driving the business. Another thing that sort of I have as a second timer is a roadmap. Back in the days of Marketo, we didn't know how Fast should we grow or how should the quota for a sales rep be or what the gross margin should look like? Fast forward to today. There's lots of great resources out there, Saster included that tell us how we should grow, what should we do and the ability to rely on that to drive our growth. Like for example mapping to the battery, triple, triple, double, double, double is a really important way for us to know that we're on track. Another thing I'm doing differently is in how I'm thinking about the market. This market map is something I put together to just sort of really help to understand who all the players are in my category with these different kind of sub pieces to it. But you know, the reality is in Marketo it was a hyper competitive world, right? It was ugly at Marketo with our competition, especially with Eloqua going kind of kind of at it, you know, if you will, both in the field in marketing. I'm doing it very differently here. I mean we are taking partnerships with almost every company on this map if possible for the goal of building the category together, which has been great. It's why count based everything has taken off so quickly because you have companies collaborating around it and frankly it's just nicer. There's no reason to be nasty out there. A little tactically and then we'll get to the discussion. I am focusing on bigger deals. My second time at Marketo we started kind of fairly SMB, so small deals, 12k and that's a tough business. You have one user, they leave, there's nobody left to use the product. They churn, they take just as long to get up and running, they have more questions, there's less expertise and so we're really trying to focus higher. My goal is a 40k average contract value where we regularly are doing six figure deals. We're getting up there, we're currently at 26k ACV and that's just a better, healthier place to be. And part of that is building our enterprise muscle earlier. Right. We're not a full enterprise company right now but I know we want to be there and that's a hard muscle to build if you wait too late. So we're trying to build that as early as possible. And then lastly, as I said earlier, we are drinking our own champagne on kind of driving outbound sales, you know. And you know again like at Marketo is really hard when we try to layer that on. You know, after six years of sales reps just kind of being fed inbound leads and so trying to be Balanced at the beginning with both marketing, but also driving that outbound, I think important muscle to build and also to make sure that you don't create a culture where sales kind of forgets how to do that. So if you may notice, that was actually only nine things we're doing differently. And so I think we'll hit the other number, 10 and a few other points with the Q and A.

That's great.

Am I good?

That's wonderful. Thanks, John. Great insights. Yeah, that's great, John. What? I want to focus on some operational aspects, but I also want to get a little bit more personal with John and just hear a little bit more what it's like from a personal perspective as an executive being not only a second time founder, but a first time CEO. So first question, John, you know, obviously you've been very successful with Marketo. That was wonderful. And when you were building Marketo, you hadn't had that yet. And so now that you have that success under your belt, how are your goals different at Engagio? Are you operating differently, going for the bigger win or taking more risk? How are you thinking about that?

Yeah, well, I mean, I don't think that, you know, I don't think the most successful entrepreneurs are ever just financially driven, you know, and I certainly haven't been, you know, for me, most of my career has been, I think, driven by, I mean, a vision that I have of kind of pursuing the one to one future. You know, just making marketing and sales more intelligent, you know, more meaningful through data and analytics. And that was true of what I was trying to do with Marketo. It was true of what I was trying to do with Epiphany before that. And it's definitely true of what I'm trying to do with Engagio. So that goal of just trying to, I want to build that product is really what drives me more than anything else. But you know, there is obviously there's some personal stuff there too. I mean, I'd like to prove, I think I'm seen out there as a very good marketer. I want to prove that I'm actually a good CEO too, you know, and that, you know, could be maybe Marketo was just a fluke. Right. You know, but I think obviously if you can do it two times as a success, then that's aligned as opposed to a data point. And in terms of the financial stuff, I don't want to sound snobby about it, but yeah, once you've had some success, a few million dollars doesn't make a difference and so, just as you can see, in our fundraising strategy, I have priced ourselves out of any kind of quick flip. And so almost by definition, we're going for something big.

And for you, as second time founder, that's been very successful. Is there any increase in pressure because you've been successful? Are there higher expectations? Do people expect you to know everything? Does it feel ever like there's a greater weight on your shoulders?

Yeah, I mean, it's way better to be second time than not. I mean, let's just be kind of clear. It's great for fundraising, it's great for building our market presence and awareness. So I don't get a ton of pressure externally, but I do. I get a little bit from myself. And partly there is that kind of, oh, gosh, what if this thing doesn't work out? The fear of failure, particularly, because now having, I mean, it's a drug. You get addicted to it. If this thing doesn't work out, and then I got to just go become CMO at some company after this, that's going to kind of suck, you know, so there is kind of that personal thing. I think the other thing that is different as CEO, as opposed to not the CEO, is I have more doubt. You know, I mean, at Marketo, I mean, I had a lot of confidence and trust in Phil. He was an amazing CEO. And that trust in Phil, I could almost sort of like. It felt like, okay, it's going to be all right. Phil knows what he's doing and he'll guide us to success, which he did here at Engageo, it's me. And that doubt that you always hear CEOs have, is there? Of course. Because there is nowhere else for that to go. I will say I think one of my strengths and weaknesses is, is that I am a pretty confident person. I've sort of always had that, a lot of self confidence. It turns out. I think that's probably one of the most important things you need to have as a founding CEO, because that doubt is so there all the time. If you're not confident, it's just going to chew you apart.

So I think I can't see anybody, but I suspect there's a lot. I was going to ask for a show of hands, but I suspect there's a lot of aspiring CEOs in the room who are not CEOs today. And that's where you were at Marketo. What advice would you give for people in the room that would like to be a CEO someday? They're not today. What should they be learning today in their current role to put themselves in a position to become a CEO. What do you wish you had even learned more of?

Well, on the skill side, the two things you always hear is product skill and sales skills. And I think on the margin as a founding CEO, the product skills are really important. I mean, just because at the end of the day, if you're a technologist or if you're on the business side, you gotta be able to figure out a product that's gonna have product market fit. So what? Anything you can do there I think is important. I didn't have any sales skills before doing this, or I had never done sales before. But I think as the CEO, you're just always going to be a good salesperson, even if you don't actually have any formal sales training. So I think that's one. I think number two is everybody here is already doing this. Learn everything you can about SaaS companies. Kind of just those ratios and those metrics and how they work and how they grow. Well, assuming you want to start a SaaS company. But I think learn that. And then the third, I think is the most important is start thinking about your team now, long before you've ever started. When I left Marketo, I didn't, I mean, I left on very friendly terms and I didn't go hire a whole bunch of people out of Marketo. But I did have my wish list of the four people. I was like, oh, I would love to have those people come, join, engage you at the right time. And over the last two years, I've managed to actually bring those four people over. And it's great because, you know, it's so hard. Building your team is probably one of the hardest things as an executive. And if you kind of can have those people identified and nurture those relationships along the way, makes everything a lot easier.

So when he alluded to this with the picture of his kids, but when he founded Marketo and I invested, we didn't have kids yet or we were just having kids. Now we've got kids and you've got two kids and obviously all the busy life that comes along with that. How are you managing work life balance the second time around? Is it different?

Yeah, one of my theories is always that people are going to work. People have like a set point for how hard they work. And I do kind of have my envelope of how much I work and don't work. I think my co founder, Engageo also has kids. And so, you know, we definitely, we don't have a Culture of people working till 8 or 9 o' clock at night, you know, but we have a work culture of when you're in the office, you work kind of intensely, which is kind of what you tend to see from people. You know, parents, especially parents with young kids. I wish I had more time to work out. I'm trying, you know, but that's not as much for being an entrepreneur, that's from being a parent. It's really hard to do both at the same time. And I do take pto. I think that's the other thing that is probably even more than else when you have family, you go on trips with your longer trips than I ever did kind of when I wasn't a parent. And I've had to find ways to be able to actually take time out of the office and keep things going. And by the way, I think that's role modeling, something nice for the company. I do want people to be able to take breaks and then come back.

Got it. You mentioned fundraising. Obviously very different strategy this time. Part of that's your success, part of that's the environment, I think. But you didn't talk about choosing investors, constructing a board. You've done that two different times now, with some overlap, but some new investors. What, what advice would you give to folks in the room about constructing a board and an investor base?

Well, you know, as you know, I wish we were able to work with you this time, you know, and I'm glad you're a personal investor, but we haven't been able to make it work formally. I think the most important thing is trust. I mean, that's again, mom and apple pie to say. But, you know, I had luxury of being able to look at a lot of different firms, especially across my rounds. And inevitably what I chose each time was people I know and trust me, even if it's not the best terms, the best valuation. Because the reality is these are the people besides my wife who are going to have the biggest impact on my happiness over the next few years. I really wanted to know I had people I trust in terms of board composition. I'm not super like, oh, I need somebody exactly like this. But I tend to think about four roles of what I want from my board members. There's the strategist who's going to help really guide me on the big issues and make me think about things that I'm not going to think about. There's the operator who has been there, done it, knows, okay, you should do this, you should do this. Have you considered this kind of technical. There is the networker, the person who just knows everybody and can make introductions and get us into accounts and help me hire and all that kind of thing. And then there's, I guess, what I would call the fundraising specialist, someone who just knows the investment industry really well and can kind of guide on fundraising strategy and tactics and things like that. Obviously, some investors like you can fill more one of those categories. But I do try to think about, all right, how do I get all those different pieces filled?

That's great. I think we're just about out of time. John. Thank you.

Thank you.

Congratulations, everything you're doing. Good luck at Engagio. And round of applause for John.

Thank you. Doug.