How to Keep Your Customers Forever with Cloudflare and Gainsight

Sam.

So we have today, I'm thrilled to have Michelle Zaitlin, who is the. One of the co founders of Cloudflare, and she actually joined straight out of Harvard Business School when everyone thought she was crazy to just go straight to a startup. And her role, I think some people have described it as doing many, many things, but one of them is translating the technical capabilities of the company into something that customers understand. And she'll explain to us in a second what Cloudflare does. And then we have Alison Pickens, who is the COO of Gainsight, but she joined actually about five years ago when the company was about 60 employees, a million in revenue, series B. And in fact, she actually joined as the chief Customer officer of Gainsight, which is no small feat when, and frankly, kind of a daunting task when your business is all about customer success and having an effective platform there. So let's see. Both companies are about eight years old, eight or nine years old, and have had enormous revenue growth over time. So what you can't really see here are just some headlines, which is these companies have had enormous growth over time. You have cloudflare grows over 80% year over year amid significant product rollouts. You have an announcement that was, I think maybe just a month ago that said this quarter we've released 15 new products. You have this which says that over the past three years, Gainsight's revenue has grown over 1,000%. Okay, so one, you don't have that kind of growth without having happy customers. And two, you don't have that kind of growth without being able to support happy customers. So from these folks, both have strong customer success backgrounds, but also COOs. So in terms of how do you scale and how do you support that, we invited these two to share a little bit. Okay, so let's go back to the early days. And so the early days. Let's take us back to the early days. So. So I don't know if Jason's here. So I remember in the early days of Echo Sign, right, where Jason used to sleep, you know, in our, with our, in the room. We are married, by the way. You're just wondering. Anyway, the, the computer used to be open, right, Because BT was their first customer and BT is obviously in a different country. And so he would sleep with the computer open with the volume on maximum, so that if a ticket came in, it would wake us both up. Now I would just go back to sleep, but Jason would come in and take that ticket. So, Michelle, take us back to the early days. Of Cloudflare, you never did anything like that, did you?

That's a perfect description of how it is in the early days, and I kind of miss that sometimes because I. It's not like that anymore. Take more pictures along the way because you can never go back to those moments. But no, that's exactly what our experience was. I mean, different industry, different, but exactly the same. Early on, three of us started the company, we have three co founders, and we had this idea and we started to make progress, and pretty quickly we had six people working on the idea. And I just remember those early, early days when we were just desperately trying to get customers to come and try and use our product, and it was really hard to get to the first hundred customers. We were asking every single person we knew, everyone that they knew, and we were also super frugal. We had no money. And so I got like a piece of cardboard for one of the IKEA boxes that we had used to build each of our desks. And it was a big rite of passage for each of us to build our own desk. We took one of the cardboard boxes, and every day that we got a new customer, I would color it in. And the idea was once we got to the hundredth customer, we were going to take the team, which was six of us, to Vegas. And it took us a long time to get to 100 customers, but we did. And literally, I would color in the cardboard box every day. And we eventually got to 100 customers, and then we took everyone to Vegas and we just. That was our first team retreat, and we just had our ninth one last week with 760 people. So we have since grown a lot since then. And we actually showed a photo from that first team retreat, and it's like, you know, this is what everyone did and what it was like. And it's both amazing in those early days where you would do things like that and the people who did things like that, and we had our version of people working all night or whatnot because they just had to keep the network online. And today it's very different.

So, Michelle, I forgot. Give us your 30 seconds on what Cloudflare does to put it into context.

Sure. So Cloudflare, we. For Internet properties, if you have an app or a website or a blog, we help make sure it's fast around the world. We help protect all of our customers from online cyber attacks, and we make sure you have good reliability. So we do performance, security reliability for any Internet property around the world. So we have about over 10 million Internet property that use Cloudflare. And Every day about 25,000 sites sign up. So everyone from Zendesk, who you heard about earlier to Goldman Sachs to the New York Stock Exchange to small businesses use Cloudflare to be fast, safe and reliable.

Great. And I'm going to come back to you in terms of. Okay, when did you move beyond the six people and sleeping next to the computer with the volume turned on? So, Allison, so you joined Gainsight as we the first of the customer success of the first to really lead the function was so.

Actually, interestingly, I joined in like a jack of all trades, business person role. So I was doing everything from selling because like back then everyone was selling no matter what their role was, to like prospecting into new markets to building sales apps, building pipeline. I even led finance for a little bit. And then about eight months in, we realized that we're a customer success software company, so we really need to figure out this customer success thing. And so I ended up taking on the team in an early stage and scaling that out.

So when that happened, what was the first thing that you did?

So the first thing I did was to hire an enterprise customer success person. So interestingly, at the time we had been selling to a lot of other SaaS companies. Essentially it was people in our network, like founders in our network. Most of them were quite small, but we recently had closed a pretty big deal with a very large enterprise customer and a couple of others were in the pipeline. And we realized that we had no DNA really within the company to serve enterprise customers. It was a really different kind of thing. So I actually came from a management consulting background. I'd worked at bcg and having been familiar with that profile of person, it seemed like we could recruit a former consultant to work in a consultative capacity with enterprise clients, even if they weren't working on the sort of normal analytics that you see in a management consulting world. They're working on a lot of the same sort of engagement management, project management, like stakeholder alignment in a SaaS customer success context. So I ended up hiring an engagement manager from McKinsey, which is essentially like the first level management role. And he joined and managed client relationships to begin with. We gave him a few of our largest enterprise clients and he figured out what to do. He had never been at a SaaS company before, but he figured it out and then hired a bunch of people under him and sort of created a scalable process around it. Today, actually, I think four years, three or four years later, he's our VP of customer Success management and support. So it was awesome to find someone who could actually scale with the company and build it out.

So you hired someone who was.

Not.

From the industry, not from the customer support or the industry, someone who had not actually done that function before, but it was a jack of all trades, someone who actually could learn it on the way. So natural athlete type.

Exactly, an athlete. And I think what's great about that is the previous conversation was all about the risk of waiting too long to let someone go move someone out of a role. Should you be hiring really experienced people sooner? I think that's probably true in a lot of cases. But I think the benefit of hiring someone who can deal with ambiguity is that they can evolve with your business.

So Michelle, what did you guys do when you finally said okay? Well, I guess tell me, at what point did you say okay, we need to hire someone? Maybe it was all those three stages that you went through. I saw you nodding a lot. And so when you finally said, okay, I need to hire someone, what did you do? Did you go for the natural athlete? Did you go to someone from the industry? Did you go to someone from customer success?

So we started with a very much a self serve business. So we had, we started with a free plan and a $20 a month plan and people would just show up with credit cards to sign up. And again, of course, early on, the founders talked a lot to those customers and we had good customer support, but it wasn't a traditional sales team. What happened was our customers would come to us and say, we love Cloudflare, but I have to pay you more than $20 a month because they worked at real companies and they're like, if I only spend $240 a year on my performance and cybersecurity needs, I will get fired. So I need a, I need a bigger, I need a, I need a, I need a business plan or enterprise plan. And so basically that really pushed us to find a solution that would also cater to larger organizations. And so once we did is we had a lot of inbound interest coming in. And at some point, as a founder, you just can't do it anymore. And so what we had is we also had a really strong generalist. It was an MBA student from Stanford who actually really was the first person who would go through a lot of that inbound interest and kind of learn sales and talk to the customers and figure out our messaging and all these sorts of things and ran the process. And they were very smart and curious and can do a lot of different sorts of things. I think that that works really well, up to about a million dollars in ARR. And then at that point, sales is all about being a repeatable, scalable process. That is what sales is. And as a founder, I don't think we really understood that. And very quickly we came to understand that. And so we ended up the first, I guess, executive we hired for our organization, who was our head of sales. And he still runs that team today. And he's really grown that organization to over 300 people today. So it's been pretty amazing to find somebody who came very early and was able to grow it. What? Chris. His name is Chris Merritt. What Chris did that was really smart. And I remember we talked a lot about this during the interview process is he really admired how LinkedIn built their sales team, which was he's like, look, I want to hire four really smart people. I want a couple people who have deep sales backgrounds and a couple that don't and sit in a room together and learn and all learn, share learnings from each other. And that worked very well. And he was inspired by what LinkedIn did, which apparently they did the same thing and that worked really well. So the four original folks on his team, three of the four still work for us and the other one went on to do business school at Harvard Business School. And so, and they've really become leaders in different parts of the organization. And they joined and some had deep sales background, some didn't. And now they've become really strong leaders within the company, which is pretty amazing.

Yeah, that's great. So in the early days, before we get to the growth and scaling stage, where did customer success reside? Or your first hire and that team?

Yeah. So for a SaaS business, three metrics matter. You have to be able to acquire customers, you have to keep the customers you acquire, and then you have to sell more to those customers over time. Like every SaaS business is measured on those three metrics. And as soon as you start to understand that, you start to run your business like that, once you have product market fit, you say, okay, how are we going to acquire customers to come in? The customers we acquire, how do we make sure they're happy and stick around? And then how do you do more business with those same set of customers over time? And so for us, at first you're really focused on acquiring customers, especially if you're doing the contract kind of mid market enterprise sales, the $60,000 a year sales, the $100,000 a year sales, and then eventually you get up to the million dollar plus a year sales, or that's how it was for us. And it turns out you start by, okay, we're gonna go sign these 60 $100,000 contracts, because that's different than someone coming and putting a credit card in. Nobody spends $100,000 a year with you without talking to somebody and battle testing the product. And so at first, our sales team really reflected much more of a traditional business development rep and account executive, a solutions engineer to help with, because we're a very technical company, very technical. So we have a lot of technical sales help. But then once they sign, first of all, you want to make sure they implement you, and then you want to make sure they have a good experience. And in a company like Cloudflare, where we have a really full product roadmap and you have to think to yourself, do you have a full product roadmap? And if you do, and you want to sell more things to your current customers over time and again, there's three metrics that matter, one of them being customer expansion. So you really want to think about how do you do more business with your customers over time. You then need a team that is managing those customers who are getting to know them, because you're launching a lot of things and you want your customers to be able to keep up with it. And so early on, even though we really focused on the customer acquisition side early on, very quickly, we recognized, hey, we need someone. Now, once we have the customers to be checking in, doing quarterly business reviews, seeing them at dinners, and finding out what do they like, what don't they like. And again, with a company like Cloudflare, we do a lot of things for our customers. So if they came in with, in our case, a performance need, how do we make sure they know that? We also have a cybersecurity solution that they can also adopt over time. And what we found is as customers like doing business with us, for one use case, they are happy to spend more of their budget with us over time because they like our team. And I think that is the, if you can figure that out, your growth, that's how you get into these great growth numbers of double digit, high double digit growth.

So, Alison, you guys are a little bit behind Cloudflare just in terms of size. So some of the things Michelle talked about is right, you've got to sell the product to them, you've got to get them to implement it, which is sometimes a little of a challenge in and of itself because they don't implement you, they can't love you. Right. So talk a little bit about how you guys have dealt with like implementation. Is that all one team? Because you're a little bit smaller and then what are they measured on?

Right, Totally.

Yeah. We've gone through some several evolutions of our organizational structure over time and we've learned a lot in the process. I do think that partly we've evolved because we've learned partly because when you're in different stages of your company, different org structures are more valuable. In the early days we actually had three different VPs who were each focused on a different part of the post sale experience. So we had a VP of Customer Success Management at one point, that was me. We had a VP of Professional Services and a VP of support. And it made a lot of sense for us in the early days to specialize across those three roles instead of having sort of unicorn CSMs who do all three activities. Because each of those activities actually required a different skill set. And each of them, at least in our business, was involved enough that it needed executive level attention. But what we realized over time was that those three executives really needed to be 100% aligned. We ended up seeing a number of cross functional conflicts. For example, the professional services team became known as the super technical sort of database oriented type team. The customer success team became known as the client relationship team. And we had trouble on the client relationship side figuring out how to pull in the technical people when the client needed it because the professional services folks were oriented around onboarding, closing out project plans. So eventually the conflicts became significant enough that we said, this is a systemic problem, we can't just solve this through one off fixes. So we ended up organizing all three of those departments under one chief customer officer. And you know, we found with that we were able to define charters for each team. Talk about the division of labor. What are the metrics that each is responsible for? So along those lines, we actually became pretty sophisticated in our metrics, which at the time was actually a pretty, I think, provocative thing in the world of customer success. I remember when I joined our company, we tend to host lots of conferences and meetups at Gainsight. And I often found in our community, this is four or five years ago, that folks were very relationship oriented. It was all about the heroics. Are you staying up all night to serve that client? And did you go on site to build a relationship? Did you take someone out to dinner? We realized those things were super important, especially to build word of mouth and build community around your product, build advocacy. But at the Same time, we needed a way to measure whether we were successful. And at the time, the definition of success was purely is the customer not in a state of escalation? Which if you think about it now, is probably not the best definition of success. Maybe low bar, maybe sometimes you gotta start somewhere. But we ended up within the first year or so defining our first adoption health score. So, you know, we needed three different levels of whether the customer is healthy. They were in green if they adopted, you know, this degree of intensity. They were yellow if it was mediocre, and it was red if it was in some sort of state of crisis. And we started to incent the customer success managers on how many clients they were moving from yellow and red into green every quarter. So they literally had a target for movement. And what was so great about that was not only did we figure out one way initially of measuring success, but now the customer success managers had something to declare victory over. Right? Like sales gets to ring the gong. They get to, you know, proclaim success at the end of quarter when all these deals are coming through. But you don't want to be, you know, in customer success where, you know, not being bad is like the death is like, is what is supposed to make you feel good.

But weren't they measured on renewals? Were they also measured on renewals?

Good question. So. So at first all that we talked about was the escalations or. And the renewal rate, right. But I think in the early stages, though, we had so few clients that a renewal event was actually not that frequent. I think, I think if you're perhaps like more a scale volume business, like even in the early days, like you have that sort of metric. But for us it wasn't frequent enough that we would, I mean, we get excited when it. When clients would renew, but it wouldn't happen all that much that we'd feel like we create a culture of victory. I think what was nice about focusing on adoption as well is that it meant that we were more at cause than at effect. So, you know, several quarters before a renewal event, we could focus on the adoption and kind of leading indicators of success so that when the renewal came around, it was kind of a non event. That's great.

So we are. Okay, so there's two. There's a couple. I want to do a lightning round on growing and scaling, which is best piece of advice you can give to someone who has to grow and scale the company to support the customer better. No pressure.

Oh, I have so many. Come talk to me after and I'll tell you all the mistakes I made so you don't make them. One thing that I will say that I think is kind of not obvious is don't burn bridges. Because what happens is when you're growing and scaling is bad things happen. And I think what happens if you're an early, whether you're a founder or just part of the early team, it's really hard not to take it personally. And it's better if you don't burn bridges because the world is incredibly connected and you just have no idea. And so that means either a customer who didn't pay their contract and how you treat that, or to employee to leaving, or someone who just does something you're like, that is just not cool. I would say not to burn bridges.

I'd say build a really close partnership between your customer success team and your product team. I think, Michelle, you spoke to this a bit. Ensuring that feedback is very quickly funneled to your product team so that you can close the gap between what your product helps customers to do without human intervention from a CSM and what your product is capable of.

Right.

So if you can close that gap, it means less csm, require less CSM help, required fewer headcount requests, and ultimately a better client experience.

Thanks. Okay, so there's a couple of things that when I've talked to you guys about, have really resonated with me. And so one of them, Michelle, is what I call not all revenue is good, which is really hard in the early days. So tell us a little bit about how all revenue is not good.

So for us, and I'm sure this will resonate with some of you is we started to go up market and we started to be able to close these, you know, 50,000, $100,000 deal sizes. And that was a big change from $2,400 a year. And you have to learn and you have to hire different types of people to service that. And the expectations with somebody when they're spending $60,000 a year with you is very different than when they're spending, you know, hundreds of dollars. And so that was going really, really well. Really well. And we are building our sales organization and go to market around that. And then the million dollar contract came and our salesperson was so excited because this was going to make their like quarter their year. Our head of sales, Chris, the person I referenced earlier, he was super excited about it because who doesn't love million dollar contracts, right? You get to your goals much faster. It's great. And I remember Matthew and I Matthew's my business partner. We were just like, no, no, we're not. No. And they were like, what do you mean, no? And it's like, we're not ready as an organization because the expectations of somebody when they're paying, spending a million dollars with you, I mean, is much higher than when someone's spending 60 or $100,000 with you. Again, you strive to make all customers happy, but the level of scrutiny for that customer, it was also a very high traffic site and very high profile site. And so we actually had a lot of debate internally, but ultimately we walked away from the deal and we said, we really want you as a customer, but not yet. And what was interesting is, first of all, everyone got behind that decision. I mean, we had a discussion, but once the decision was made, everyone got behind it. And instead the salesperson who was in charge of that said, hey, we'd love to stay in touch. And basically 14 months later, we won that contract when we were ready. And so I think that you can say, no, not right now, but get to know that customer, because there are actually very few services that a company won't give you another bite at the apple for if they're willing to talk to you at that point. People will switch if they're not happy. And so this was one of those cases where I think we weren't ready. We waited and it was, sadly, I can't. There's no sliding doors. I don't know what would have happened had we taken it. But based on everything I know that happened after that, I think it was definitely the right decision for the company and we didn't want it to dictate our product roadmap and all these sorts of things distract us. And I think in the end we got the customer just a little bit later and it was better for our business.

I think it's also interesting because sometimes it's like, well, how do you know if you're ready to take that million dollar customer in for you? You said it was actually pretty clear that you weren't ready, at least from.

Your perspective, which was what it was from my perspective. But again, hindsight is a very powerful thing. You're like, of course we weren't ready. You know, I think for us it's. They had a lot of, you know, product request features. And of course our engineering team was like, yeah, of course we can do that. And all of a sudden you're like, well, if we start to do all that, what about all these other things that we could build for the rest of our, our customers. And again, at the time, we had a lot of customers. And so it actually became a forcing function to have a conversation of no. And again, it's not clear. Look, none of the hard decisions are clear. And especially as a. If you're a leader in a company or the founder or C level executive, I mean, all the gray stuff comes up to you. All the other things, get your team can take care of you. Hire a great team, they know, but it's all the things that aren't clear that get service. So it was not obvious. And again, I think Chris, if he was sitting here, had really strong arguments of like, of course we should do it, it will make us better. It's true. You know, since then we've taken on customers. They make us better, right? They make our product better, they make our organizations better. But there is also a thing of getting too ahead of your skis. And that's an art. Enough science of knowing when. And in this case, it was just they were a very high traffic, high visible site where any problem would be magnified, amplified in many ways. And we were just like, this is. We're not ready yet.

Thank you, Michelle. We'll probably have time for one question after I ask Allison the final question here, which is. So Alison has this great podcast about customer success. And I was listening to it, as I do, and it struck me as something that was very. One of your guests talked about, which is, how do you describe the role of a customer success organization? And what she said was making the unknown known. So we. Which I really love. But can you elaborate a little bit on that? Totally.

Yeah. I'll give you my perspective. So we talk a lot nowadays about human machine interaction, right? It's obviously like a big theme for us. It's software is eating the world and you've got all these robots and sort of like the complexity of how, like, technology interacts with humans is obviously like a huge theme of our time. You know, often though, we think about that human machine interaction as being mediated by ui, right? It's all about, like, how. How navigable is your ui? Is it understandable? But the reality is that in the B2B world, it's not just about the UI, it's also the customer success manager that's mediating between those things, right? Like, customer success is essentially working with that poor human being that's struggling with your software to try to get value from it. And so in that sense, as I sort of mentioned earlier, CSM is kind of like CSM of the Gaps. It's the gaps between what your customers expect from your product and what your product actually delivers on your own. On its own. So in that sense, if customer success is constantly filling the gaps and creating band aids over gaps in your product, there's a risk that actually those facts about your product experience aren't surfaced to your product team. So customer success managers can help your client figure out how to use your software and also communicate what's known to your product teams that ultimately you can scale.

I love that Alison's podcast is called the Customer Success Podcast.

Yes.

Okay, any questions before we wrap it up? Oh, we got Pam. So the question is about how do you manage distributed teams, which I think more and more all of us are facing. And I know Michelle, you have how many different geographies right now?

Well, we're in 12 cities around the world but again the Internet never sleeps and we help keep our customer sites online no matter what. And so we from very early were in San Francisco and London and then added Singapore very quickly. And so if you have offices around the world like that, there's not one time during the day that all of you can be together. And so a couple of things that have worked well for us. We early on adopted an internal wiki where a big user of Confluence, which is an Atlassian service. As soon as we should have written more down earlier, I used to think we just have to get things done, take the time to write it down because that actually helps with asynchronous communication. So we write a lot more on our internal wiki teams that customer success, customer support, our technical operations team, they actually do handoffs. So especially on our support team and our tech ops team where they're day to day managing the, you know, when San Francisco gets to the office at nine in the morning they do a handoff with London and then at the end of the day at five o' clock they hand off to Singapore and then Singapore and London handoff. And so they do that every day where it's like. And they write up it on the. They have an internal blog too of here are the known issues, here's what's come up. Our other teams that don't have that, they alternate their team meetings between European time or Asia time. And so you're alternating week after week, even our company wide meeting because now we have seven, we have 800 people that work at Cloudflare and we're in a lot of different geos and we have a company wide meeting once a week where this morning was at 9:15 and next Thursday. Well next Thursday is Thanksgiving, but that's not a good example. If it wasn't Thanksgiving next Thursday we would do it at 5:15 and we alternate it and so once and then we record it and the other team watches the other GEOs that aren't awake during that time watch it as a team the next day. So some of these things that sound silly actually if you can instill it. I loved one of our. Someone on our recruiting team actually just was in Singapore and helped build up that office. She did a great job and now she just moved to New York and we only have six people in New York and so she's there to help build that out. And we were just meeting last week and she's like, Michelle, like we're going to start to watch Beer Meeting. It's called Beer Meeting, our company wide meeting. She's like, we don't watch it as it. And I'm going to start to implement that. And it's like it just becomes it because it becomes this constant communication drip once a week across the entire company. It holds us together. No matter what your GEO is. Those things matter a lot. And then finally we bring everyone together once a year. And not every company can do that. We spend a lot of money on it. And if you just talk to the people in the company, they really value that we bring people together. People, people that they don't get to, they talk to all the time online but they've never met in person. People they work with all the time they get to know better. And that's been a great investment for us. And we make it open to any role no matter how long you've been at the company. And we've been doing it since we are six people. And I think that it's, I mean we just had 760 people. So people say when is it not going to scale anymore? And so far it's scaled. Great.

Thank you so much Michelle. Thank you Alison. And thank you.

It.