From Burn-Out to $100M in ARR with Jason Cohen, Founder of WP Engine

Please welcome jason cohen, cto and co founder of wp engine. Oh my goodness, look at that. This is not a presentation, this is a sermon. And we're going to take as our object of study a passage from the Book of Hacker News. This post was put on Hacker News about a couple months ago, anonymously. It's titled I don't want to be a founder anymore. I'm using a throwaway account because there's a lot to lose from speaking how I feel. I founded a company several years ago. Fast forward to today and we're profitable, growing steadily debt free and are about to be acquired. The problem is I'm supremely unhappy. Each morning my first thought has been what if I didn't work here? I explore what it would be like to work at Walmart. It seems so stress free. Then my phone starts ringing and I'm snap back to reality. This morning I locked myself in the bathroom with the shower running so my wife wouldn't hear and cried my eyes out. So from my possibly skewed point of view, I have two options. I can quit, which effectively kills any acquisition, and the company as well. I can suck it up and work on the same thing for two to five more years. I've been mulling over a third option which is to hire someone to do my day to day. But I don't know how to make it work. The product is too complicated for someone to come in and take over and and it just isn't that interesting. It's just a glorified crud app and it's been hard to retain developers. Is it common for a founder to go through this train of thought before an acquisition? Is there a trick to convince yourself you want to keep doing this? Maybe I'm depressed and need drugs. Signed a founder in Ping. So let's answer his question. Is it common? So there was a study by Columbia business school of 22 entrepreneurs who all exited their businesses and made 10 million or more personally from it. So in other words, success. 21 out of the 22 were depressed after having that success. It's not just common, it's what always happens. So this is ha ha ha, except all of you are going to be like this, except one out of 22. And that's not okay. This is Marcus Persson. He founded Minecraft. He sold it to Microsoft and made hundreds of millions of dollars. I don't know how much more successful you can get. And he almost committed suicide and did it on Twitter. It's not funny, right? They all hate me and this is success. Maybe he shouldn't have sold the game. No. Even though he's about to do that. Best thing I ever did to sell Minecraft. What are we supposed to do with this? So that's of course what we're going to talk about. Is there a trick? Nope, of course not. But let's start exploring what's going on. How did they get here? How did all of us get here? Well, it's not intentional. We didn't intend to do that. It's frog boiling in water. That means it's happening right now. It's unfolding right now for you unintentionally. And so the right question is, what should you be doing differently now in order to prevent this? In order to build a company that's more healthy and prosperous, of course. And also avoid this balloon payment of emotional toil at the end. And so the thesis that I'm going to talk about today is I think you have to make emotionally difficult choices and I'll be very specific all along the way to build a healthier company and to make you also maybe avoid this fate. Which kind of puts in question why we're all doing this at all. I did this wrong. In my previous startups, I've sold companies for millions of dollars. In our current startup, we are now at 100 million in ARR, which is always the magical Saster number. So in other words, and I'm still here after eight years and not upset, so you see, I've done it wrong and right. So hopefully this will be useful to you too. So let me zoom in on this part. The product is complex and boring too. So the product is. Now these sound like good reasons, but they're not the real reasons. I can't get someone to help because the product is too complex. Really? Because I know a lot of developers that work on really complex stuff. That sounds like a good reason why it's too hard to get help. But that's not true, is it? But it does sound like someone who's very self important. It's so complex only I could possibly understand. Maybe that's more of the real problem. And also the product is boring. Okay, so it's so complex no one can figure it out but you. And also it's so boring no one wants to work on it. And that's why you can't retain developers. Probably not. So I want to prove that you are making exactly this error now, the same error that this guy's making. So raise your hand if you have ever fired someone. Too late. Taken too much time and finally did so. That's most hands. Okay. Now raise your hand if you've ever fired anybody. Too soon. One, two, three. Okay, so about 1 100th. So I think the pattern is clear. This is very predictable. We make this failure of judgment all the time. We all do it. We're all guilty. But what's going on? Same thing. There's good reasons not to fire someone. You know that team. Before I get a replacement in that team, it's too hard for that team to continue. I need to wait. That sounds like a good reason. That's the excuses we tell ourselves why we are not doing it right. We all know that's not true. We've all been on teams with someone that shouldn't be on the team. It'd be much better if they were just gone, rather than the team having to make up for them, clean up after them. It's not the real reason. Another reason we tell ourselves, especially as new founders, is I'm a bad manager. I haven't set expectations. It's not their fault, it's probably mine. I need to set better expectations to give them more time. We say, sounds like a good reason. Except what about the other seven people on the team that are thriving? You probably are a terrible manager. That's probably true. But we need to operate now, and everyone else is operating now. We don't have time for this, actually. So even if that's true, it doesn't mean that person's a bad person or something like this. It's just they're not a fit here. Now, that's the truth. So these sound like good reasons, but they're not. The real reason is simple. It's scary. You are scared. Can you accept that? Can you just accept you're scared and that's why you're not doing it? And that's the whole argument. And it's not a very good argument. Of course. Of course it's scary. It's a hard conversation to have. What if they cry? What if you cry? What if they get upset and do something? What if other employees get upset and do stuff? What if they get violent and you have to take out a restraining order? I've had to do that. What if they get depressed afterwards and kill themselves and you have to explain it to everybody? That has happened to me. There's a reason to be scared about it. It is scary. It is scary. Okay, fine. Also, you got to do it. That's the truth. Making the emotionally difficult choice is better. So what's a More general framework for thinking about these kinds of things. Not just this. Well, there's things you want to do and things you don't want to do, things that need to be done in the business and things that don't really need to be done, of course. And the problem is you do the things you want to do and you're the founder or the CEO or whatever, and so you don't have a boss telling you you can't. And we just established you're a shitty boss too. So this is a problem. You. No one's stopping you from doing the stuff that say, doesn't really need to be done, but you know you can. It's very tempting, but it's a failure mode because you're not spending the time on the things you should be doing, like maybe working on sales or dealing with a difficult person. You should be doing the stuff on the right. So how do you know you're in this bottom right position where you're delaying something that needs to be done and you need to fix it quickly. How do you know that? And the one way that I know is you can't stop thinking about it. When you wake up at 2 in the morning, you're like, ugh, like that. That simple thing. Not a deep analysis, just that simple thing of I can't stop thinking about how this person's here and they shouldn't be. That indicates you do need to take action. Why? Because when there's an emotionally difficult choice, like having to fire somebody and one that's not as difficult, and you can't decide, you can't decide only because you don't want to. Otherwise it would be no question if the easy one was clearly the better one, you wouldn't be stuck. The reason you're stuck is that you have to make the hard choice. So that's how you do it. And then how do you do things that are difficult? How do you do it? Well, do it quickly. Delaying only hurts everybody. Everybody. You, the team, the person. Be decisive. Our CEO Heather Bruner has a terrific phrase about this, which is general patent on the decision. Mother Teresa on the exit. Be decisive and then be kind. That's the right way to do it. Okay, let's dig into another part of our object of study here. If I quit, I kill the company and the acquisition. Wow, you must be so important. That's what that person's thinking, right? Except what's really happened is the person has built a brittle organization, one where if anything happens to the founder, the whole thing is going to melt, I guess and imagine the stress that that puts on that person. I guess this person has not hired anyone who can actually run the company and run their functions. So that it's not true. Or maybe the person has and are allowing to do that. Either way it's a failure. Right, so let's dig into this too because you do this kind of thing too and I want to show you. So this is an obvious fallacy. We all know this. This is the smartest person in the room. So that's wrong. So Steve Jobs actually was the one who did this thing that we all also know A players hire. We all know this. And you can tell Apple's full of A players because just look at them. Or maybe that's KISS without their makeup. I'm not sure. Anyway, so this is what we think we're doing, but we're not. Let me show you. Here's why you actually don't hire A players. You ask am I an A player? So let's say you're an engineer and you say I know how to hire engineers and you do you know how to interview and manage them later. And so you hire other A player engineers and product people or whatever. Ok, good. And then of course there's the majority of things that happen in the business that whoever you are, you're not an A player about. So what do we do? We say OK, we've got to do AdWords for sure. I don't know AdWords. So I'll do it. I the founder, I will figure it out. I'll spend some months and figure it out. Then I'll know the lingo and I'll know what's important and all these kind of things. And then I'll be able to hire that A player because I'll know what to ask and what to do and how to manage that person. That's what we all think. And this is the fallacy, the idea that you can become an expert in something important, something that's an entire career for someone else in a few months and then hire an A player. That's of course not true. So you're actually a C player at best. And then of course you're going to hire only the things that you know after part time, couple of months of work on it, which is bad. And so you end up building this organization where some people are A players but most aren't. And then guess what, those functions don't work very well because you haven't hired very well. And so you're like screw that we'll just hire more engineers and engineers can just magically do marketing and sales and stuff. That's what engineers say. This is why. So Steve Jobs also said. I hate quoting Steve Jobs. Really? Because everyone does. At least I'm not quoting Musk. No Musk quotes. Anyway, so you hire smart people so that they tell you what to do. They buoy you up. So how that's weird, because Steve Jobs is the one who tells everyone what to do, right? But no, what Jobs did is he hired the best designers in the world and then held them to a very high standard, which is what an editor does. Not a writer, not a maker, an editor. And he wasn't the best technologist, but he had great technologists who were mostly, if you remember the old Mac OS stuff, they misspelled the word dispose. Sometimes I think they were high. Anyway, be an editor. He hired the best coo, the best operating officer in Tim Cook that there is, and hold him to a higher standard. That's actually what he did. So that's part of the trick is to do that. So here's how you do this. Here's how you hire people who are better than you and know more than you about a thing and then manage them, because that's weird. And yet that is the definition of how to build a great organization. So the first thing is when you're in the interview process, you. You're looking for someone who's enlightening you. In other words, you feel like you're learning a lot just by being in here. And you come away thinking, man, even if we don't hire this person, we need to do like half the things they just said. That's how it should feel. Zuckerberg said another person, to quote all the time, Zuckerberg said, hire someone that you feel like if the circumstances were a little different, you would work for that person. But the second thing I think is more interesting, which is results orientation. And here's what I mean. There's action oriented people and results oriented people. Let's say I'm hiring an event planner. Here's what an action oriented event planner says. When you ask, tell me about the last great event that you put on. They say, oh, man, we had these great curtains with uplights that look really cool and the food was really good. I was able to get a deal on the shrimp and everyone said the shrimp was good and people seemed to really like it. Action oriented. Talking about stuff that you did, that's probably good stuff. Here's a results oriented answer. Well, the goal was to have 150 people come. We had 200 reservations and actually 168 came, which we were super proud about. Now, we weren't actually sure how many sales leads we got, but we got 12 leads. Two have already closed. Two more look pretty good. I'm not sure about the rest. Anyway, it was successful enough that we've decided to put on three more of these next year and do them in different countries and see how that goes. Results oriented now, why do you need to hire results oriented people in order to solve for this problem of management? It's because by definition, you can't tell them how to do their job. By definition, you don't know how to put on a great event. So you can't tell them or manage what they're doing. You have to manage the results of it and hold them to that bar. So by hiring for people who already think that way, already like to be measured by the results that that they make instead of what they do, then that's how you're going to manage them. And that's all going to be nice because that's how the person already likes to operate. So you hold accountable to results and edit. Also, this is the right way anyway to manage everybody, including the folks that you are expert in that stuff. Why? Well, taking the engineering example, the fun part about engineering is inventing something new and architecting it and then all the labor is improving that you're right and bug fixing bugs and stuff. That's the annoying part. So if you're the architect and everybody else has to do the scut work, you've taken away the only fun part that stinks. That's bad. So I think this is the right way to manage everybody, period, regardless of how. So if you can agree that the best thing is to have everyone in the organization be better than you, then you can create a resilient organization where instead of feeling like this person crushed, the only person that can do everything, it's just the reverse. Should feel like the people in your organization are booing you up, that they're doing a lot of the work, that they're inventing things you wouldn't even have thought of. That's what a strong organization looks like. And that's part of what prevents not only the mental health problems, but also is a stronger organization almost by definition. Right? So this is some tricks, but I want to talk about this thing about success and kind of dwell on that for a bit. I want to go back to this because he said I Have two options. And then he lists three options. There really should be a fourth option, which is just don't do any of that. Just keep running the company. But that's not really an option for this person. They're obviously so upset and sad that even that's not an option. They're stuck. They really have zero options. So we gotta figure this out. So maybe you shouldn't sell. Maybe that's the answer. And you have this phrase, you sold your baby. Is that true? Is that what it's like? Well, there was a study where they put founders in MRI machines. So that's mapping the brain and seeing what the brain's doing. Then they show them these neutral, nothing pictures, like landscape. And the brain's just sitting there in neutral. And then they show those folks pictures of their own kids. That's my daughter. And of course the brain's like, doo, doo, doo, right? My kids, good, bad, everything, Right? Just stuff. So then they go back to the landscapes and the brain goes back to neutral. And then they show pictures of the founders logo. Brain goes right back into kid mode. Same pattern. It is a baby. It actually is. So it makes sense why this is kind of, I don't know, emotional, stressful, whatever. Same thing. Nevertheless, it's not true that you should just never sell. Just like. Just like Marcus here. It's not true. It's not true for me either. So this is my previous company, Smart Bear, and it was sold just last year to Frisco partners for $450 million. That's awesome. Except that I sold it to Insight Partners in 2007. So. Why did everyone laugh and clap? What? No, you're supposed to go, aww. So maybe I shouldn't have sold. Except this trajectory wasn't happening when I was the CEO, was it? It was this. That was the trajectory we were on. So that's not necessarily good. Plus, I was burnt out. I'll tell you this story. So I got this offer from Insight, which was good, just financially speaking, multiple on this and that. It was good. So I come home and tell my wife, oh, I don't know what to do. We're profitable, growing. Everything's good. Also, this offer is actually good. I don't know what to do. And my wife goes, well, you have to sell. I said, why do I have to? She says, well, don't you realize how unhappy you are? No, I didn't. I had gotten in that place, but I didn't. I fixed this at WP Engine. I've been at WP Engine longer And I didn't have this problem, by the way, had I stayed. There's another option, which is maybe look at the time frame here. This is a 15 year time frame. The software companies don't necessarily last that long. There are other people in our same space that were also bootstrapped and profitable and that the green curve is what happened to them. So it's not true that I should have stayed. Having left, I got to be a stay at home dad because that's when I Left, actually, in 2009 when my wife was pregnant. I was a stay at home dad for a year. And I wouldn't give that back for anything. And then I founded WP Engine in 2010 and like I said, we've passed 100 million annual revenue. We just got a $250 million investment from Silverlake, and we're worth more than Smart Bear. Right? I'm not saying that's always how it happens. Of course not. Oh, thank you very much. That's not always how it happens. The point is, it's not true in retrospect that you should never sell. Not true. So here's the issue. Startups always change. Always. Or you change even though you think you won't. Maybe it goes well and your job changes. And as a CEO, it's a very different job at 100 or we're now at 500 people. It's a very different job at these breakpoints than it was early. Maybe you'll be unhappy there. Okay, maybe you give up the CEO position, but then you're not in control. Maybe that doesn't make you happy. Or maybe the startup goes sideways and you just get bored after 10 years. Or maybe it craters, of course. And fails. Like it's going to change. That's the deal. And it's hard. That's the deal. So you have to build it in. So here's how I've been successful this time around. So this is our CEO, Heather Bruner and me winning the Entrepreneur of the Year award from Eny, actually last year in Austin. And Heather joined our company four years after it was founded. And yet we're both winning the Entrepreneur Awareness Award together. Is that weird? Someone joining that late gets to be an Entrepreneur Award winner? If you're thinking that way, then you're not paying any attention. Yes, of course. Oh, you're so blessed and awesome as a founder that no one could possibly impact the business as much as you. Well, then you're not hiring impactful people and that's your problem. Heather is amazing. And as our CEO, a lot of the success we have today is due directly. Directly to the things Heather did in building the executive team and the strategy and so on and so on. All the things that are necessary and that wouldn't have happened if I was the CEO. I know, because I'd done it before. I saw that trajectory. Right. Our executive team is majority female, for example, we have diversity in many areas in the business. Half of our engineering management are women, for example. So we. By asking, what are all the people that could bring power to the business? And getting those people in, whether you're the founder and CEO or anybody else, that is how we got strong, and that explains our success. I want to give you this story because this helped me emotionally get over this moment, because a lot of people ask, well, what was it like to decide to not be the CEO anymore? Because, of course, that's a big decision, and sometimes it goes wrong. I mean, there's a lot of things. Things around that. Right. So it's not. It. Of course, it's not always true that you. You should just replace yourself. That's not true. But this. This was useful to me emotionally. So I'm gonna tell you this story in case it's helpful to you as well. So I was at this bar in Austin and talking to one of. One of our board members and kind of getting through, like, intellectually, I knew I shouldn't be the CEO. We had about 80 people, and I was like, I'm not a good CEO at 80 people. That's. That's not my sweet spot. But emotionally, you know, it's hard. Of course, it's your baby and all that. Of course it's hard. That's okay. And so he says, jason, I know what you're thinking. I said, what? He says, you want the credit? I said, what do you mean? He goes, because someday, like, what if you ring the bell on the nasdaq, you want the credit. And, you know, it's the whole team effort to do that, but you want the credit. And they said, you're right. Like, as shallow and selfish as that is, I struggle. True. I do. I think founders generally do. And he says, you're the founder. You'll always get the credit. It's so obvious in retrospect. Right. This is not a deep observation, but I just needed to hear that right then. So maybe in the hopes that maybe you need to hear that, yeah, you always get the credit. You don't have to hold on to these things like CEO or sui, whatever, or blah, blah, blah, for ego, but because you'll still get the credit, your ego's going to be fine. You're going to get the ego stuff anyway, which is cool. It's not a bad thing to want to stoke the ego. I want to stoke my ego, of course, but you can still do that. Ok, so here's the framework that I used to make this decision and I encourage everybody at WP Engine forevermore to use this framework to figure out what should I do and what should my career be and all this. So I show it, show it to you too. And you've seen some of this kind of stuff before, I bet, but maybe, hopefully there's different contexts now that you can evaluate it in. So of course there's things you like to do and things that you're good at. Oh, Venn diagrams. You know what's coming. And so this stuff, I know this stuff is learning, right? You're not good at it, but you like it. Learning's good. You should do some of that. That's cool. And then this is toil, like stuff. You're good at it, so you do it, but you don't enjoy it, like maybe accounting or whatever. And then this is the sweet spot where you're happy because you're good at it and you're doing okay. We all know about these things, right? So the next layer, though, is what does the company need? Again, this is gonna tie together all the things that we have just talked about. What does the company actually need us to do? Because these are various failure modes that we're in all the time. And again, I think if you address these modes, the company will be stronger and you'll be healthier too. So that flow is a trap, that happy flow is a trap. If that's not what the company needs you to be doing. The typical example is the engineer who implements the feature, which of course you can do in two days and of course it'll be good and three customers will like it. But actually what you need to do is double sales and that one feature ain't gonna do it right. It's not what the company needs. So that's a trap that we've seen. This is a trap too, but the company needs it to be done and I like it. Well, if it needs to be done, then it needs to be done. Well, you gotta focus. Startups always are constrained by time, even more than money, so you have to focus. So doing things that you like that the company needs is wrong, because the company needs it and it's one of the few things that you really do need to focus on, that it needs to be done well. Another failure mode is this, which is burnout. In other words, the company needs it to be done. I'm even good at it, for real, but I don't like it. We always put ourselves in these positions as leaders and founders. This crappy word servant leadership, it leads to stuff like this. This is the scut work that needs to be done. And I can do it. So I'll do it so the team doesn't have to do it. That sounds altruistic. And what it does is burn you out because you're doing all the shit you don't like to do. And is that really the promise of entrepreneurship, that you get to do all the stuff that you don't like doing? What the hell's the point of that? So it's true, it needs to be done. You're even good at it. But what you need to do, of course, is find someone who also is good at it, who likes it, right? Because they'll be thrilled. Because that's fulfillment again. You know that's coming. You have to go in the center of the Venn diagram. It's never like the bottom left corner, is it? Someday that's what I'm going to do. And you want to be like in the bottom left anyway. So of course that's the place. And it's an idealization. You can't be in there all the time, blah, blah, blah. I know. But the more that you are in here, this is how you do it. So that's what I did. This is why I wasn't the CEO. Because what the company needed and what I liked, not to mention what I was good at, did not mix. I like product and engineering. So I went and became the CTO and did product and engineering for a couple years. Then the engineering team got to be 100 people. And I don't like managing people, remember? Or maybe you don't remember, but I'm a shitty manager, just like all of you. And so I don't like doing that. And they deserve a good manager, right? So then I just ran product and now I have zero direct reports, just like Dharmesh at HubSpot. And so that's good because I'm not a good manager. And so if I continue to demonstrate to the whole company that even I can just change jobs, not at will, but we can talk about what is the right place for me at the company. And it's possible for any given person, including me, that one day. The answer is, there's nothing here for you because there's no intersection. That's okay if that happens because you're having this nice conversation, and a person maybe who's had this conversation can be armed with figuring out what that is at their next position so they can be happy, fulfilled. Maybe happy is the wrong word. How about fulfilled? So this is what everyone's doing. And if everybody's doing this in the business, it's magical. It's idealization, I know, but it's a magical thing when everyone on the executive team is in their star slot and in fact, everybody, everywhere in that team. It is a magical, beautiful thing. And you've built an organization that's not just a great business, but that people want to work at and they're fulfilled at. And that's more important than ARR. And I'm sorry to say that at Saster, where ARR is everything, but it's more important that you're building lives with people doing something important that everyone's fulfilled at that is fulfilling a real job as entrepreneurs. That is incredible. So I want to close with one more reading. This is from 2,500 years ago, just to prove that none of these ideas are new. These are just what humans do. This is just what leadership and building organizations is. So this is from the Daodejing, an old text, and it really summarizes everything that we just talked about. The best leaders, the people do not know they have them. The lesser leaders are loved and praised. Even lesser are feared, and the least are despised. Those leaders who show no trust will not be trusted. Those leaders who are quiet their words are valued with the best leaders. When the people's task is completed, the people will say, we did it ourselves. So I say unto you to close this sermon, hire the right people and let them do it themselves. Be a shepherd, not an emperor. Be an editor, not a tyrant. Do the hard things that are the right things and set your ego aside. Because remember, no matter what, you will still get the credit. Thank you.