Episode 4

The First Big Win

Hosted by Okta's Frederic Kerrest and Epic Magazine's Joshua Davis

Featured on iTunes' Business New and Noteworthy

In this episode, we’ll talk about the first big win and what it did for the company. You’ve spent half your first round, hired a dozen employees, signed 20 customers. But be honest: Those “customers” were other start-ups, local companies, friends of yours. Then comes a cold lead, a different time zone, your first “mainstream” prospect. It’s the first deal that would legitimize you. You need the win, the money, the morale boost. Time to step up!

Listen Now

Next Episode

You aren’t hitting your targets, key team members are quitting, and you're being thrown out of board meetings. It feels like your company is falling apart and you don’t know how to hold it together. What do you do now? In this episode, we’ll discuss those "oh shit" moments, and how some of the most innovative founders discovered the will to persevere.

Guest List

Carl Eschenbach

Partner at Sequoia Capital

Alex Asseily

Founder of technology company Jawbone and Zulu Group

Maggie Wilderotter

Former CEO of Frontier Communications

Fred Luddy

Founder of ServiceNow

Josh James

Founder, CEO, and chairman of the board of Domo

Transcript

00:02
Maggie
I said, "Give me that account. I'll take that. I'll take on that account. And we'll turn that around." And I did. I would turn account after account around, and get 100% of their business, and be responsive.
00:14
Carl
there's a reason the elephants are at the back of the zoo. The zookeepers do that for a reason. They make everyone walk through the rest of the zoo to see the small animals and buy stuff, then you get to the prize at the end.
00:23
Alex
It was a glowing review. I think it was a really, it was a kind of like, "Good job, guys. This is the product that we all wanted you to launch."
[ "Music fade." ]
00:35
Joshua
I'm Joshua Davis, co-founder of Epic Magazine and contributing editor at Wired.
00:39
Frederick
And I'm Frederick Harris, co-founder of Okta.
00:42
Joshua
And this is Zero to IPO. A podcast about what it takes to grow a start-up from a brilliant idea into a brilliant company. Told by the people who've done it.
00:51
Frederick
Today on the podcast, we're talking about the first big win. That deal that takes your start-up from small fry to major player, and thrusts your company into the spotlight. It's the moment your company becomes real, and it can be both exciting and terrifying.
01:05
Joshua
Maybe you're almost out of money and you've got employees, maybe a bunch of employees, and you've signed some customers, but if you're telling the truth, you're going to go bankrupt if you don't break through. And then a lifeline comes through. It's a lead. Maybe a big lead. And you know what? You need it. You need the win. You need the money. You need the morale boost. It's time to step up. But how do you do it, Freddy?
01:27
Frederick
Well, we're in luck, Josh, because today we have five folks who are going to talk to us about how they've done it. They've been there. They made it. That first big win, it's come through for them. We've got Sequoia Capital's Carl Eschenbach, formerly president of VMware. Jawbone’s Alex Asseily. ServiceNow's Fred Luddy. Frontier Communications' Maggie Wilderotter, and Domo's Josh James. First up, Carl. When it comes to start-ups, Carl has been around the block and back again. During his tenure as CEO of VMware, he took the cloud computing and software company from 200 people to 20000 people. He's served on the board of a lot of start-ups, and he's currently a partner at Sequoia Capital, one of the most venerable venture capital firms in the world. But even Carl had to start somewhere. Here he is discussing one of his earliest big wins, and it's a fun one.
[ "Music transition." ]
CLIP 1: CARL ESCHENBACH
02:18
Carl
I'll jump right in I guess, guys, and talk a little bit about that first big win.
02:22
Frederick
And set the stage for us a little bit, because you know, VMware's a massive company. [crosstalk 00:01:52] at the time.
02:27
Carl
It's going on $8 billion now, it's crazy. It's an $8 billion revenue company. At the time, I joined in 2002, we had a couple hundred people. And our average deal size was like $2000. It was crazy.
02:39
Frederick
Was one of your goals to say, listen, let's land some bigger fish here?
02:43
Carl
So, it was. But I also wanted to be careful, because I believe to build great companies, the transactional business model early on is very, very healthy, because you're not chasing the big deals to get to every quarter. So if you can get to your quarters through a transactional business model, that is a great thing. And then you build up to landing the bigger deals to make the quarters look spectacular.
03:05
Frederick
And did you ... Now when you talk to entrepreneurs, do you give them that advice? Do you say, "Listen, don't go hunting for the big whales?"
03:12
Carl
Yeah. I actually do have that conversation quite a bit, but I also don't want to have a specific playbook when I work with entrepreneurs, because one playbook doesn't fit all.
03:23
Joshua
So, back in 2002, you're trying to steadily build from $2000 sales. A cadence of transactions, so take us ...
03:36
Carl
Yeah, so it's interesting because you know, in 2002 I remember initially saying, "How many opportunities do we have in the forecast above 10K? Above 25K, and above 50?" And we just started working, working really hard to build a transactional business model, and as I said earlier, starting to layer on the bigger opportunities and we tracked that maniacally, you know, throughout the forecast process. Then we started getting some momentum. And you know, for a couple years we started doing bigger, bigger deals. The value proposition started to resonate after being thrown out of one account after the other -
04:16
Joshua
And what did it feel like, going into those rooms and pitching your heart out?
04:21
Fredericka
And then getting thrown out?
04:22
Joshua
And then getting thrown out.
04:24
Joshua
I mean, people were probably kind about it, I expect, but ...
04:26
Carl
Yeah, listen. For the most part. If you get to the right level, even if they said no, if a senior person says no, they do it in the right way, because they don't want to ruin a relationship. They want to keep a relationship with you. So, it would be fine. But it was frustrating after a while, because you knew you had a value proposition, quite frankly, that was very straightforward and very easy. It was a financial ROI and TCO sale, so it was a very simple sale. But people just didn't believe in the technology.
04:56
Joshua
At any point did you question yourself and your own sales ability because people were like, "It's so obvious. It's so simple." Is it me?
05:04
Carl
You know, you start to question, right? And that's where the perseverance came in. Because in these younger companies, half of the battle is believing yourself. Right? You have to believe in the technology and the product, and the value proposition you have for the customers, and if you believe in it enough, that passion oozes out of you when you're in front of the customer. And customers, by the way, buy from people, they don't buy from companies, and I just knew ... Admittedly maybe to a fault I'm a very enthusiastic, energetic person, and I think that is very contagious. And I knew if we stuck at it with this value proposition, we continued to believe, we would crack through all of the no's and start to get a couple yeses, and it started to happen.
05:53
Frederick
Which was the one that turned it on? When you said, "Alright. Now I know that I did not just fall off that turnip truck." Someone said yes. Now, we've got something.
06:02
Carl
That's great question, Freddy, and I can remember it so vividly. So, there was a couple 100K, 200K deals where people would buy multiple license to do big server consolidation efforts, but we found a vein in a vertical called the pharmaceutical vertical. And we found a vein that, if they used our software platform to develop a drug, it just helped them start to develop their drugs faster. I was still based out of New Jersey -
06:29
Frederick
So, for you it's New Jersey -
06:30
Carl
It's New Jersey in my backyard, I'm from Pennsylvania, it's an easy drive. The rep was in Jersey, so we go -
06:36
Joshua
You and the rep went together? Just the two of you?
06:39
Carl
Yeah. We didn't really have managers. I was managing everything, and we get in front the decision makers, and we get in this room, this conference room. I can remember it like yesterday, right, in Princeton, New Jersey, and we're sitting there and we have this multiple million dollar deal on the table, and we get in there and the customer just starts beating us up over pricing. They beat us up over that we're a young company, can we really commit to you, do you have the resources, are you enterprise scale? All the things that young start-ups deal with when you're trying to sell that first big deal. And as the meeting was going on, I kind of got a sense that the customer knew that he needed this technology. It was that valuable to them. But they weren't going to back down from pushing us in a negotiation. So it got to a point where the customer, you know, we said, "This is our price. This is the value." We actually could show them the value by using the software, so you know, it was hard for them to argue against it, because of the cost savings they had. And finally, the customer just said, "I'm sorry, we're not going to do it. The price isn't right. Let's just call it off."
07:48
Joshua
What were you feeling at that moment?
07:50
Carl
So, it was one of those kind of spontaneous reactions like, just depending on how a negotiation is going and the flow of the deal, like I had a younger rep with me, and I just looked at the gentleman and I said, "I respect your decision. If this is not right for you, let's not do the deal. This is what we can do." And he looked at me, and he said okay, and he stood up, and he left the conference room.
08:15
Joshua
It was over.
08:16
Carl
And it was kind of over. And me and the rep were sitting there. And the rep ... The guy walks out, and the rep looks at me and he literally almost had tears in his eyes like, "What did you do? This is the biggest deal in our company's history. This is my biggest outcome ever financially."
08:33
Joshua
Because he was getting commission on it.
08:35
Carl
Oh, yeah. I mean, this was like ... Yeah. At the time, it was a big paycheck.
08:39
Frederick
This is like two, five times his annual quota. This is a big deal.
08:41
Carl
Yeah, and it was probably three times his annual salary, right? And OTE.
08:47
Joshua
And he just saw the guy walk out.
08:49
Carl
And the guy walked out! And the weird thing was, he walked out without saying, "You guys can leave," or anything. So he walked out, and I just said, "Let's just sit here. Let's not leave. And see if he comes back." Because eventually someone's gotta tell us to leave their building. And so we just sat there. The guy came back in.
09:07
Joshua
How long did he stay away?
09:08
Carl
Probably 15 minutes. And he comes back in and says, "Are you guys going to leave?" And I said, "Can we use your conference room a bit longer? We're going to stay. I just want to talk to him, we don't have a place to go. Can we just have a conversation here?" And he's like yeah, but I mean, we don't have anything to talk about. And I said, "I understand, but if you have any change of heart, come back and maybe we can talk." He's like, "No, that's not going to work." So he leaves again. So we sit there, and we're like, alright, now what do we do? And we're just sitting there like ...
09:36
Frederick
What were you doing?
09:37
Carl
Mostly what I was doing was consoling [crosstalk 00:12:25]. "We're going to get this, hang in there. It's all good."
09:44
Joshua
Were you saying that, like, "He's going to come back in"?
09:46
Carl
I honestly, I sat there and I wouldn't let my emotions or my body language reflect this to the sales rep, but I sat there and I said to myself, "What did I do?" I honestly questioned myself, and I'm thinking, If we leave here, we go back, we tell the company Because you probably could have got something done if we would have wiggled on price. We would have been out of there and this whole drama would have been over. But it was just ... It's a principal thing, right? Because you have the value. So the guy finally comes back in -
10:15
Joshua
How long is the second time?
10:16
Carl
Third time. Third time. Third time.
10:17
Joshua
How long has he been gone now, another 15 minutes?
10:18
Carl
Another 15. Yeah. He's like, "Are you guys done?" And then finally when he came back in, I felt like ... You know, I always had this rule in a negotiation. Typically, the first one who talks, loses, right? And you just sit there and let the other person talk first. But in this case, I felt like, quite frankly, we were losing, and I had to talk. So I said, "Listen. Sit down. Just for a couple minutes. Before we leave, can we just talk through this? What's really holding you back?" And at the end of the day, it wasn't the price, it was as much about the discount. Like, they just wanted bigger discounts so they feel like they won. Right? So, I never like to give a bigger discount. What I would say is, let's keep the deal size the same, but I'll give you some more product. Especially if you had conviction that they're going to use more product over time, as opposed to lowering the price, just give them more product.
11:10
Joshua
Give them more licenses.
11:11
Carl
Yeah, and so we had this conversation, and then he said, "Okay, I have to go talk to someone to see if we can do the deal." So he leaves again, and this time we sat a while. Because he had to go talk to someone. Now, the truth of the matter is, we don't know who the hell he talked to, if anyone.
11:27
Frederick
If anyone!
11:28
Carl
If anyone.
11:29
Joshua
He just went and played ping-pong for a while.
11:30
Carl
Yeah. And then he came back in, and we came to an agreement, and it was the big first enterprise license agreement we did, which kind of set a precedence.
11:38
Frederick
You came back from New Jersey and you were heroes. To be clear.
11:41
Carl
Yes.
11:43
Frederick
And everyone says, "I want to be a hero too," and "I want to triple my OTE."
11:49
Carl
Exactly. And there's a reason the elephants are at the back of the zoo. The zookeepers do that for a reason. They make everyone walk through the rest of the zoo to see the small animals and buy stuff, then you get to the prize at the end. So, you have to do the same thing in selling. You have to wait until you get to the elephant or you can risk the business, because a challenge with young companies, and it happens all the time ... When I say "challenge," it's not a bad thing, but it is a fact. You get to your quarter end, and you need one or two deals in these young companies to make the quarter. Period, end of story.
[ "Music transition." ]
12:20
Joshua
One of the things I love about Carl's story, Freddy, is that he's talking about the fact that he was 18 years into his career, and he says he feels like he's fallen off the turnip truck. He can't do anything right. People are slamming doors in his face. They're saying no, no, no, and he's like, "What has happened to my life?" So, even for somebody as senior and seasoned as experienced as that, it's hard as hell. For all of our listeners out there, you know, who are going through a similar experience, don't think you're alone. This happens to even the best.
12:52
Frederick
It is the stick-with-it-ness that really marks the successful entrepreneur, number one. Number two, when you do get that sale, it's like lights on. Everyone's super pumped, because you've just been getting beat on for weeks and months and years.
13:06
Joshua
Yeah, so it's go time.
13:08
Frederick
It's go time.
13:09
Joshua
I think what is interesting here, I think there's an insight here, which is for an entrepreneur at this stage of growth of a company, you kind of have to flip the switch in your brain, and look at those no's as learning experiences, as ... They're a win. You just have to tell yourself that they're a win in their own way.
13:31
Frederick
Well, you gotta find the nuggets. And you have to incorporate that into what you're doing. And so, if someone says, "No," you have to say, "Why?" You have to get really good at asking why. Why is that? Why wouldn't you do that? How else would you, what other kinds of problems are you trying to solve? How else could I help you solve those problems?
13:43
Joshua
This is something that you guys at Okta experienced in the early days. You thought you were going to sell a certain kind of product, and people were like, "Yeah, that's not that interesting to us." But in the process of those conversations, in the process of getting those no's, those no's actually led you to the thing that was huge.
14:05
Frederick
Yeah, I think that's exactly right.
14:06
Joshua
Because people were telling you that they weren't actually that interested in this thing you were trying to sell.
14:09
Frederick
Well they would say, "That's interesting, but that's problem number four," and we said, "Great! What's problem number one?"
14:14
Joshua
And the only way to get there is by asking questions.
14:18
Frederick
And then you get into a conversation. You start listening from them what they care about. You're able to talk about, "Okay, these are actually the business problems that you have. Here's the technology that I have. Here's how I'm going to help you solve these business problems using the technology that I have at my disposal."
14:30
Joshua
One of the lessons that I'm taking away from listening to you, Freddy, is that you have to go above and beyond. You gotta walk down the freeway. You've got to hustle. You've got to build the relationships. And our next guest is a perfect example. Alex Asseily is the co-founder of Jawbone, most famous for their headset, and in the early days of Jawbone with their first big win on the horizon, his team faced snag after snag, each of which threatened to derail the company completely.
[ "Music transition." ]
CLIP 2: ALEX ASSEILY
15:00
Alex
Bluetooth headsets had been out, at that point, for four or five years. And all of them sounded pretty terrible and they were designed like Bluetooth headsets tended to be designed at that time, which is without much of a care for design.
15:14
Joshua
And so, when yours came out, you had $3000 left in the bank.
15:18
Alex
Yeah, and there's a whole host of extraordinary, lucky, fortuitous moments that led to us being able to get 10000 units to AT&T by December 21st, 2006.
15:34
Joshua
Was that the first big win?
15:36
Alex
That was the big win.
15:37
Joshua
So, tell us about that. Talk to us about bringing in that client.
15:42
Frederick
How did that deal happen?
15:43
Joshua
Yeah, how'd that come about?
15:44
Frederick
How'd that come about?
15:46
Alex
David Wyndham at Khosla Ventures, who at the time wasn't at Khosla Ventures, or I think had just joined Khosla Ventures in its infancy -
15:55
Joshua
Who was one of the VCs that was backing you.
15:57
Alex
This was later. They backed us later.
16:00
Joshua
So at this point he's just a ... [crosstalk 00:40:29]
16:02
Alex
He's just an advisor.
16:02
Joshua
Just an advisor.
16:05
Alex
Just an advisor, yep. He was introduced to Hussein and I by my roommate at the time of the nuclear winter, Dana Settle, who's also another VC.
16:13
Joshua
Oh, Dana Settle was your roommate?
16:15
Alex
She was my roommate during the beginning of the ... The beginning of the nuclear winter in 2005. In fact, we had quite a few parties at that house, now I seem to remember. Anyway, so, she introduced us to David Wyndham, David Wyndham took a glancing interest at the business, but he made one very important introduction, which is I think to the CMO of Cingular at the time, now AT&T, or I think it was called AT&T but it was part of Cingular. I can't remember when the restructuring happened.
16:46
Joshua
He made an introduction to the CMO.
16:47
Alex
He made an introduction, and what essentially happened is we then said, "We're working on a Bluetooth headset, it's going to be the best. We want to have a shot at getting on your shelves." And they were like, "Yeah, sure," and then we were supposed to deliver it in like, April, and then we were supposed to deliver it in like, June. And then we were supposed to deliver it in like, September. And by October, they were like -
17:09
Joshua
You just keep blowing it. Yeah.
17:10
Alex
"You guys are full of crap and you're never going to deliver this thing." And then, of course, because it's a very serious company, you actually have to go through all this certification, because they have to make sure that the headset works with all the phones they're selling, and all the phones they're selling change every three months because they're getting new phones in. We had to get units to the warehouse by ... Let's just say, I can't remember the exact dates, but let's say it was like, December 12th. Because if it didn't get to the warehouse by December 12th, there was no chance that the trucks could then leave and deliver to the actual AT&T stores.
17:43
Joshua
By the holidays.
17:44
Alex
By the holidays. And by the way, we completely missed Black Friday and like, Thanksgiving. As it is, we had completely blown the main ... The beginning of the holiday.
17:53
Joshua
It's amazing they were still talking to you.
17:54
Alex
It's amazing they were still talking to us. And the final sell, though, was basically, "Let's just get in before Christmas."
18:02
Joshua
They must have thought you guys were a bunch of jokers.
18:04
Alex
Bunch of jokers. And frankly, I would have thought the same thing. And the units arrive, but they miss the closing time at the warehouse in Virginia.
18:15
Joshua
The December 12th deadline.
18:16
Alex
The December 12th due date. The issue ... The truck turns up, or it's on its way, but we're not going to be able to deliver it because the warehouse is closed. And this is the crazy thing, is that two months before that, when I was in China at the factor, while I was walking out, the guy who ran the factory, Steven [inaudible 00:43:16], says, "You gotta meet this guy," who's name again I can't quite remember, "Who runs one of the distribution companies in the US. You guys should talk," and I think they were called Tesco. And he gave me his card, and he says, "Call me if you need anything."
18:50
Joshua
And guess what.
18:52
Alex
And guess what. We were delivering our units to Tesco, it was their warehouse that was closed. It was their warehouse that had to be re-opened in order for the units to get in. I literally am like turning my suitcases and all my jackets inside-out to find this goddamn card. Find the card. I text him, I'm like, "I really need a big favor. I need you to re-open this ... I need to make sure that the units get into this warehouse" -
19:17
Joshua
In North Carolina.
19:18
Alex
I can't remember where it was.
19:19
Joshua
Yeah, somewhere.
19:20
Alex
It was somewhere. It was like, Virginia or something. And surely enough, he texts back, and he goes, "Leave it to me. It will be done."
19:27
Joshua
Amazing.
19:28
Alex
And the units got in, they got distributed to the stores, and then we had to get a review. We had to get like, a review done. And Hussein had managed to get Walt Mossberg, who had reviewed our last headset.
19:41
Joshua
And did Walt like the last headset?
19:43
Alex
He liked it, and we also demoed it at one of his conferences, so he had a kind of soft spot for us, but he kind of also knew ... It was like a sort of ho-hum review. It was like, as good as it could get given the product wasn't fantastic. Walt gets the unit. By this point, I am like burnt to a crisp, I'm so burnt out. I'm back in London. I'm having a drink with our friend Avid in London, I get a call from Hussein going, "Dude, Walt says the headset doesn't work." And I'm like ... By the way, I had personally tested the first hundred units off the production line because, guess what, we didn't have enough money to have a professional QA team.
20:22
Joshua
You were the tester.
20:23
Alex
I was QA, CEO, and everything else. And we then ... Again, Hussein calls me up and he says, "Listen, it doesn't work. What do I do?"
20:35
Joshua
Send him another unit?
20:36
Alex
No. And I'm like ... And I literally, I start getting angry at life. I basically go, "Listen, I don't want to hear that this thing doesn't work. I'm having a drink. I'm back in London. I'm so done with this thing. Tell him to switch it off, and switch it on, plug it in or do something, but that god damn headset works. Alright. I tested it myself. It works." And he's like, "Alright, fine." So he calls Walt Mossberg back and goes, "Sorry Walt, but can you just like, switch it off and on again or plug it in, or whatever?" And it starts working. And the next day, or that week ... If I remember, it was Thursday the 21st of December 2006. Front page of the Wall Street Journal, one of our models on the front page, top right hand corner, wearing our headset. The red headset. The red version of the headset. And we couldn't produce enough.
21:27
Joshua
Do you remember what Walt said in the review?
21:31
Alex
I can't, but it was a glowing review. It was a glowing review. I think it was a really, it was a kind of like, "Good job, guys. This is the product that we all wanted you to launch." And I think to some extent it felt like that to us, too.
[ "Music transition." ]
21:49
Joshua
There's another layer here to what Carl Eschebach said earlier in the episode about, "Companies don't do business with companies. It's about people and people." What Alex is pointing out is that, that is to the nth degree. For Alex, he forged relationships with all sorts of people! Not just the sales person, not just the CEO, not just the VPs. He had this vast network, that at the end of the day, delivered that first big win.
22:18
Frederick
I think that's a key insight you're bringing up, Josh.
22:21
Joshua
There's another thing that Alex points out that I think is worth highlighting to everybody, which is this idea that if you're going to deliver something late, it better be amazing.
22:31
Frederick
That's right. Absolutely. Don't be late and bad.
22:34
Joshua
You can only be one of those things.
22:37
Frederick
Hopefully neither.
22:38
Joshua
Ah, hopefully neither.
22:44
Joshua
Sometimes, that first big win though, can be a double edged sword. And you have to understand what it will mean to your company. Our next guess is someone we've heard from before. Fred Luddy, the founder and CEO of the mega-successful cloud computing company ServiceNow. We heard in an earlier episode about his decision to start ServiceNow, and this time, Fred is going to tell us about the struggles that came along with landing one of the company's first big clients.
[ "Music transition." ]
CLIP 3: FRED LUDDY
23:13
Fred
For some reason, the folks at Deutsche Bank took a liking to what we were doing. They found our technology intriguing.
23:20
Joshua
Just to put a finer point on that, you would go in and say, "This is what we can do, and this is what we can't do."
23:25
Fred
In fact, we even said, "We have no idea how to do that." Right? And so, your prospect will appreciate that far more than telling them what you can do, because what you can do, they can validate with the customers. With other customers. Right? But when you say, "I have no clue how to do that," it might be a deal-breaker, but it's far better to break that deal right then, because all of a sudden you broke that deal with a huge amount of credibility in that person's eyes, right? You didn't solve my problem, but I'm going to remember you, because if you know, if you can, I'm going to call you up, because I'm pretty sure you're going to be honest about what you can do as well.
24:02
Joshua
I think there's probably an impulse in entrepreneurship to say, if somebody says, you know, you go in to solve X problem, they come at you with Y problem, you're like, "Well, maybe I can figure that out." But what you're saying is don't take the bait?
24:17
Fred
It's tough. The whole notion of focus is, I think, a discipline that you absolutely have to have until you find out you're chasing the wrong thing, and then you have to give up that and go on, take a different route.
24:32
Frederick
So, let's go back to that London bank.
24:34
Fred
So, it turns out the Deutsche Bank called us and they said, you know, "This is pretty intriguing what you're doing. We'd like you to ... We'll give you a small contract for this part of your knowledge management business. Would you like to have that?" Yeah, we'd love to have that. Okay. So, went around and the month went by and all of a sudden we got another call from Deutsche Bank. They said, "Well, we'd actually like for you to take over our entire incident management process."
25:01
Joshua
Must have gone well.
25:02
Fred
And we said, "What do you mean, the whole thing?" They said, "Well, we want you to have a ... We have a service desk, global, 7000 people, 24/7. And we handle about 150000 incidents a week. And we would like you to take that business."
25:23
Joshua
And at that point, were you capable of handling that business? How big was ServiceNow at that moment?
25:30
Fred
So, we were a $4 million a year company at that moment. And they offered us $2 million a year for this business. And I -
25:40
Joshua
50% increase in your revenue.
25:41
Fred
Yes. And we knew there was going to be one of two outcomes. We were going to be successful, or we were going to be dead.
25:48
Joshua
It was going to ruin the company or you were going to -
25:51
Fred
Yes.
25:52
Joshua
Rapidly expand.
25:53
Fred
Yes. And so, we felt that we were honest enough that we could ... Technologically, we had enough scale in our technology to make this work, but you also need scale in people, because now we're servicing a global bank with global needs and very significant workflow needs. So, we did the thing that I think was right. We packed our bags and we moved to London. I was there for on and off for the better part of a half a year until we went into production. And I'm not going to say that that relationship was completely a smooth ride, because we came up short many different times. Short of their expectations. We developed a very, very honest, candid, open relationship with the folks at Deutsche Bank. And they couldn't have been more supportive. You know, there's a David and Goliath thing that happens often times with young software companies, especially by those in the financial institutions. They want you to win. Because they've been so mistreated by some large organization for a period of years, like, "If you win, I can stick this in the eye of my salesperson and they can go away screaming instead of extracting money from me again." So, often times you'll find very sympathetic customers.
27:19
Joshua
How do you play into that as a young entrepreneur? Are there tactics to do that? Is there a storyline? A narrative that you can -
27:27
Fred
I think that one's pretty simple. Number one, you have to find somebody that you understand and number two, you have to listen. You have to listen a lot. And you know, you don't have to do what the customer exactly asks you to do, but you have to listen to them enough that you understand the challenge from their perspective. And then you have to absorb, and then you have to refine what you heard and think, "Of all those things, here's where I think I can add the most amount of value." I think that that's very important.
[ "Music transition." ]
28:08
Joshua
A key takeaway from listening to Fred, for me, was the fact that you just have to be candid about what you can do and what you can't do. And it could hurt. It could hurt to say, you know what, this company's going to give you a lot of money if you just say you can do something, but the truth is, you're going to over-commit and screw yourself. It's a short term gain, but there's a long term impact.
28:30
Frederick
Yeah, I totally agree. I think here you're talking about transparency, and having that transparency with your customers ... Look, the reality of it is, you're going to forge much better partnerships in the long run if you're honest with them when things are going well, and when things aren't going well. And it's okay to pick up the phone and say, "Hey, Josh, we made a mistake, this happened, we've already fixed it. This is how we're going to make sure it doesn't happen again, and we're going to move on. Also, by the way, I'm happy to follow up with you in 30 and 90 days to let you know how we're doing on that plan of making sure this never happens again." Guess what, for five minutes, the customers will be super upset. But two weeks later, they'll think to themselves, "Oh yeah, that guy Josh. He did a good job. They messed one thing up. He was all over it. And then he came back to me. Perfect." That's the kind of partnership you really want to build.
29:16
Joshua
Sometimes the first big win comes about unexpectedly. In fact, it can come as a result of a problem. So here's Maggie Wilderotter, the former CEO of telco giant Frontier Communications, talking about her first big win.
[ "Music transition." ]
CLIP 4: MAGGIE WILDEROTTER
29:31
Maggie
Well, I do think it was a big win when I took on the regional operations responsibility at Cable Data. Because within a year, I was also running sales and marketing. So, I really got my wish anyway in a full circle. And I also grew the business exponentially with customers that no one in the company wanted to deal with, because they were really tough.
29:57
Joshua
Like who?
29:59
Maggie
One was called ATC, American Telecommunications Corporation. And -
30:03
Joshua
They were already a client, but they just weren't as big as they could be?
30:06
Maggie
They weren't as big as they could be, and they were not happy, and -
30:10
Frederick
Why not? Why weren't they happy?
30:12
Maggie
Well, they were very critical of what we were doing. You know, we were a young, high growth company, and I think as we all know, sometimes we don't necessarily do everything as buttoned up as we'd like to in technology. And you get bugs, or you know, we sent out -
30:26
Frederick
I mean, it doesn't happen to me, but I've heard the stories. I can imagine, yeah.
30:30
Maggie
Yeah, of course. Never at Okta. There's never a problem at Okta.
30:34
Frederick
No problem.
30:35
Maggie
That you would ever get involved with.
30:36
Frederick
Ever.
30:37
Maggie
You know, you and Todd just sit in your offices and do podcasts and watch TV.
30:40
Frederick
All day long.
30:42
Maggie
But, you know, we sent out millions of bills. We were the largest post office in the United States of America for seven days a month. Millions and millions of bills, we sent out. And if the bill was wrong, customers weren't really happy. It's their accounts receivable, so ... You know, somebody would mention ATC and our company, everybody would jump under their desk. And I said, "Give me that account. I'll take that. I'll take on that account. And we'll turn that around." And I did. I would turn account after account around, and get 100% of their business, and be responsive.
31:14
Joshua
So what was -
31:15
Frederick
So what happened at ATC? What do you remember? Okay, so they give you the account. Everyone's like, "Great. I want to get rid of that hand grenade."
31:22
Joshua
Give it to Maggie.
31:23
Frederick
"Here comes Maggie. Perfect. Awesome. Best day of my year. Just gave the ATC account to Maggie and went home and had champagne. Great." You went home and you're like, "We'll see what happens tomorrow." And so, what happened? What was going on at ATC? What do you remember? What was the problem? What did you do? How did you think about that? Why is it a big win for you that you remember now?
31:42
Maggie
Yeah. Well, what I did is I put a plan together. I'm very plan-full. And I always start my plans with people in relationships. And so I ... Also, from the person going home to have champagne, said, "Okay, tell me about this account. Who are the lead people that interact with us? Who is our liaisons?" And it was a woman, and I called her the next day, and introduced myself and said I was now going to be in charge of the account, and I really wanted to come out and visit with her, and get her thoughts and points of view.
32:16
Joshua
Where were they?
32:17
Maggie
They were in Denver, and I was in Sacramento. So, it's not far. Easy flight. So I went out within the next couple days and went and met with her. And she gave me the litany and the laundry list of where they had issues. We looked at getting all of those properties in tip-top shape. And because I also owned the regions, right, I could get the regional operations people to start--
32:40
Frederick
To pay special attention, yep.
32:41
Maggie
To pay special attention. You know, call me if there's ever any issue. And I then convinced her to go with me and do a road trip. And we went and visited the general managers of several of those cable operations. And the general managers loved Cable Data.
32:57
Frederick
How long did it take to turn around ATC?
33:00
Maggie
I'd say I did it within 12 months.
33:02
Frederick
12 months. And the same lady on the other side was your customer the whole time.
33:05
Maggie
Yeah.
33:06
Frederick
And at the end, there must have been some call where she called you and she's like, "Alright. We're in good shape."
33:10
Maggie
Yep.
33:10
Frederick
And that's the night you went home and had champagne.
33:13
Maggie
Well I never let go of any customer.
33:15
Frederick
Right.
33:16
Maggie
They were always mine, so even though I had other people working on them, they were still ... I answered every phone call, every email, every letter, correspondence, within 24 hours. So I was very accessible to our customers. And to our employees. I'm the same way with every employee. When I had, you know, 40-50000 employees at Frontier, I personally answered every email. I didn't have people on staff doing things for me. I answered every phone call. I went out and visited a third of our markets every year.
33:48
Frederick
I think I know the answer, but why?
33:50
Maggie
Because I think the front line is your company. You know, it's who the customer interacts with every single day. They don't interact with me as a CEO. They interact with the people that are on the ground. Or the people that are on the phones. And it was important for me to stay close and to build relationships with people who would tell me the truth about what's really happening. And not feel that there's any reprisal for telling me bad news. And I always build cultures where front line employees a lot of times would let me know before they let their bosses know.
[ "Music transition." ]
34:35
Joshua
Freddy, Maggie says that she never lets go of any customer. Do you agree?
34:40
Frederick
I think that early on, that's true. When you're building your company, every customer matters. You have to figure out how they all work. Early on in the company, we did a lot of what I would call "unnatural acts" to make customers successful. Things that don't scale. But when you have one, two, five, ten, 50 customers, you have to make them all successful. Now, when your company has 5,000 customers or 50,000 customers, you can't do that anymore. You have to build in the processes, the systems that helps most people, most of the time. And so, some of the customers might not be the right fit anymore.
35:15
Joshua
So in your case, Freddy, what was the unnatural act that set you up for your first big win?
35:20
Frederick
My first big win, I remember it like it was yesterday. It was early 2011. Our company, Okta, had maybe 10, 15, 20 customers at the time and we had this big prospect. It was an oil and natural gas refiner. I had to fly to Oklahoma to do the final sales presentation. And I went to the airport on Sunday to fly to Oklahoma, only to find out that my ticket, in fact, was for 28 days later, which was the same date and a Sunday, but the wrong month. So, I called the customer at home on a Sunday, who at the time was a prospect, and I said, "Here's my predicament. What do I do?" And the prospect said, "Well, you need to figure out how to get here because you're presenting tomorrow and your main competitor is presenting on Tuesday, and that's it. We're going to make a decision." So I had to buy a flight to Chicago that Sunday night, and then ... The red eye to Chicago, a three hour flight, and then fly to Tulsa, and when I landed it was a snowstorm. And the cab almost couldn't leave the airport. I finally made it to my hotel room. I couldn't find another cab. I was running late. I took a shower. Put on my suit, and had to walk alongside a highway in Oklahoma in a snowstorm for, I don't know, what felt like an eternity. I finally got there, and I did the presentation -
36:37
Joshua
So wait, you show up, you walk into the room. You're covered in snow.
36:40
Frederick
They gave me a towel, I think, from their on site gym and I kind of cleaned off my suit. Presented for two hours straight to the CIO of the company, the director who was running the project who I'd called at home the day before and said, "You absolutely have to be there tomorrow." I thought it went pretty well. And then I waited, I think, an hour and a half to get a cab to show up to bring me back to my hotel. My competitor presented the next day. And then, a few weeks later we won the deal. It was a huge win for us. Huge morale boost. Some years later, the CIO who then moved to another company who called me to buy the software again. I said, "Well, it's nice to hear from you." You know, "It's been a while." He said, "It has been a while but I will never forget the sight of you walking into the conference room with my director of IT and a towel in your hand because you dried off your pants from walking in that snowstorm." And I said, "Well, that's good, because I think the software didn't work real well at that time, so I'm glad I left a positive impression of some kind."
37:39
Joshua
Freddy, the first big win doesn't usually occur in a vacuum, right? You're up against people. And in the case of our next guest, he wasn't just kind of up against people he didn't know, he was up against them altogether in the same room.
37:54
Frederick
I think that's a great point, Josh, and something that every aspiring entrepreneur should get comfortable with. To really win in a big, important market, you are absolutely going to have to de-throne and un-seat some major, large, legacy competitors. No doubts about it. Josh James, who we're going to hear from next, did exactly that.
38:14
Joshua
Josh is the founder and CEO of Domo, a software as a service company, and the co-founder and former CEO of Omniture, a web analytics company. Two fun facts about Josh. From '06-'09, he was the youngest CEO of a NASDAQ, or New York Stock Exchange, traded company.
38:32
Frederick
Second fun fact. As a child, he starred in a Kellogg's Honey Smacks cereal commercial. Such a formative experience that when we sat down with him recently, he was able to recite the song verbatim.
38:44
Josh
You can start your day the Kellogg Honey Smacks way! While Honey Smacks is sweet, you'll be hopping down the street!
38:49
Frederick
So, here's Josh with a story about his first big win, when he had not one, not two, not three, but 12 competitors, and they're all standing in the same room! Unbelievable.
[ "Music transition." ]
CLIP 5: JOSH JAMES
39:03
Josh
So, number one at Omniture, the first big deal that we got was HP. And they had 12 different vendors that they were using. 12 different competitors. And they brought all of us in. Strange is, I thought this was how business was done. Because it was one of my earliest experiences. They had us all come in and present at the same time, in the same room.
39:20
Joshua
To each other!
39:21
Josh
Yeah.
39:22
Frederick
You're all sitting there and you watch the other 11 competitors.
39:23
Josh
Yeah. And then they narrowed it down to three -
39:26
Joshua
In the room? This is like Survivor.
39:28
Josh
Yeah. They narrowed it down to three, and had us come back that afternoon, and we were able to ask the panel of HP people questions. Blind questions. And so, there was no name associated with it, and then HP would answer it to all three vendors. Only won that deal ... It was ...
39:46
Joshua
You won it.
39:46
Josh
Yeah, we won that deal.
39:47
Frederick
That day?
39:49
Josh
Yeah, it was a million ... 1.5 million bucks, something like that a year. I think the biggest deal we'd done to that point was probably, you know, $150000.
39:57
Frederick
So you walked in that morning with 11 other groups, and you walked out that day and you won that deal.
40:01
Josh
Yeah.
40:04
Joshua
Set the stage a little bit, because that's a pretty extraordinary story. So, you show up. First of all, where is [crosstalk 00:50:09]? Was it just you, was there a [crosstalk 00:50:13]?
40:14
Josh
I went down to Houston, to the Compaq offices.
40:16
Joshua
So you're in Houston. It's just you, or do you have a team?
40:18
Josh
It's myself and head of sales and CTO.
40:23
Joshua
So, you're in Houston. There's three of you.
40:25
Josh
There's three of us.
40:26
Joshua
You're in ... It must be a pretty large room, because the other 11 competitors have their whole teams.
40:30
Josh
Yep.
40:31
Joshua
And then -
40:31
Josh
It was an auditorium. I mean, there's 50 people in this room watching us. Yeah, and they just kind of went through the initial ... Everyone did their initial presentation.
40:37
Joshua
You had a PowerPoint.
40:38
Josh
Yep.
40:39
Joshua
This is a good moment for your acting skills coming in, obviously.
40:42
Josh
Yeah, it was -
40:43
Joshua
You gotta perform. You're on stage, essentially. So you get to do your eight minutes. Everybody else does their eight minutes. Then HP takes a break to do the judging. And then how do they communicate to the nine that they've been axed?
40:57
Josh
Uh, you just got an invite for who got invited back.
41:00
Joshua
For round two, for the finals.
41:01
Josh
For round two. And the round two was intense. It was intense, for sure. It was like, not eight minutes. It was like, 16. Well, we ended up really hating these people. The way that they approached it and the way that they asked questions that made us look worse than we really were, which you just take so personally. Especially back then. Now I get the game a little bit more, but so personally. About six months later, I was at my last vendor panel that I've ever done, and I was on this vendor panel, WebSideStory was there, and it was five vendors, and they asked, you know, "How did you guys all start?" And so, everyone kind of ... Nedstat, that ends up being Google Analytics ... Not Nedstat, I can't remember the name. But anyway, the merchant that ended up being Google Analytics, they went and they're like, "Oh, we started in my living room," and then someone else is like, "Oh, we started in the basement," and I was like -
41:43
Frederick
The dining room.
41:44
Josh
We started in the basement here ... It was kind of like vendors were being nice, we were being cute about it all, you know? And then WebSideStory goes right after me, "Well, unlike these other vendors, we started to be an enterprise company at the beginning, and we're still an enterprise company, and we're here to serve all of you," and there's like, you know, 500 potential leads in the audience. I was so pissed off, because I'm like, that's such BS. You guys started as a porn tracking company.
42:08
Frederick
Did you jump back in?
42:09
Josh
Oh, yeah. So we do the ... That's the intros. So then they ask the question, "Alright, who's ..." Somebody asked audience questions. So somebody raised the question. I don't even remember what they said. I was like, "I'll answer it. But before I do. First, let me help this guy sitting next to me who clearly doesn't know the history of his own company. You started out as a porn tracking company. And still, the majority of your revenue comes from porn. In fact, a year ago, when we had ComDex, you guys were the platinum level sponsors of AdultDex. Which is fine, to each his own, but don't sit there and act like you guys are this clean company that's profitable because you're better than the rest of us, when you make all your money on porn." And then I answered the question. We almost got in a fight. [crosstalk 00:52:55]
42:55
Joshua
This is probably the most interesting web analytics conference vendor meeting that anybody's ever seen.
42:59
Josh
Oh yeah.
43:00
Frederick
Is this recorded online? Can I go watch this on YouTube?
43:02
Josh
No, I don't think it's recorded online. But then like -
43:04
Joshua
Well, we just got a good rendition.
43:05
Joshua
You know, where's WebSideStory now?
43:05
Josh
We bought WebSideStory.
43:08
Joshua
Oh, you bought them?
43:09
Josh
We ended up buying WebSideStory, yeah. So we bought them, we're like, you know, I'm so earnestly trying to make sure this all works perfectly, and talking so earnestly on the earnings call and describing this acquisition and how strategic it is, and then the next day Coremetrics comes out, and they were the number two ... They were like one fifth, one sixth our size. And we were fine with them being number two. They were smart, they were, you know ... It's like, fine. Let them do what they're doing. And they came out and said the next day, they put up big ads everywhere. "Just because the gorilla tells you what you have to eat, doesn't mean you have to eat it." And so, you know, they told WebSideStory, you can all switch over to Coremetrics for free. And the first year's free and the implementations free. And we were so pissed, because we got so many calls from investors, be like, "Your thesis is falling apart. You're not going to get these customers. I hear they're all going to go to Coremetrics." And so, somewhat famously in our small little circles, we sent billboards, rolling billboards the next day through Coremetrics' parking lot, and we put all the logos of the companies that had switched from Coremetrics to us, and the last one was Home Depot, and they didn't know that Home Depot had signed with us that day. So, we gave them a big discount, but these big rolling billboards through the parking lot, and we had apes, people in ape outfits handing out banana chips to all the Coremetrics employees as they walked in that says, "Come join the winner just like these other," you know, logos have.
44:29
Joshua
This is some theatrics.
44:30
Joshua
This is guerrilla marketing.
44:32
Frederick
What are you doing?
44:32
Josh
That's exactly what it was!
[ "Music transition." ]
44:40
Joshua
Freddy, it sounds like sometimes, you have to go negative. You have to attack the competitors. You have to point out their weaknesses.
44:47
Frederick
It's certainly hard to argue with the success he's had. So, whatever he's doing is working for him. What I would say is that you have to make sure that the culture and approach that your company takes is something that you as an entrepreneur and leader are comfortable with. For Josh that might mean one thing, for me it might mean that same thing, or it could be something else.
45:04
Joshua
It's interesting, Freddy, we're hearing different things in this show, which is part of the point of doing it. We want to hear different perspectives. You heard Maggie Wilderotter earlier talking about the importance of respect, and you just heard Josh James talking about going negative and attacking and playing a little bit dirty. You also have talked about getting comfortable with being uncomfortable, and I wonder what's the right answer? Where's the balance?
45:31
Frederick
I mean, I think you're framing the challenge that every entrepreneur faces very, very well. You have to think about, I need to get these short term wins. I need to keep my company moving. I need the first big win. But I also need to do it in a way that I'm setting a standard and an example that employees, people who work with me at my company, are going to follow for a long time. And I think what you're talking about is how do you do that balance between the short term win, but the long term success?
45:58
Joshua
That moment. That first big win, it actually sets the stage for what the company will become.
46:03
Frederick
Because I think what you're pointing out here, Josh, is very interesting. It's not what you do in the easy times, it's what you do in the tough times. And so, you want to make sure that when everyone goes through all the tough efforts to get that first big win, yeah, there's a lot of energy around that, there's a lot of excitement around it, we can do it, but you also want to make sure that the right lessons are pulled out of that.
46:27
Joshua
This has been Zero to IPO. A podcast about how successful entrepreneurs got from that first big win to all the other big wins after it.
46:35
Frederick
Special thanks today to our guests on the show, Carl Eschenbach, Fred Luddy, Maggie Wilderotter, Alex Asseily, and Josh James for taking time out of their busy schedules to chat with us, and to our friends at the Martin Trust Center for MIT Entrepreneurship for collaborating with Okta to bring this podcast to life.
46:51
Joshua
If you like what you've heard and want to know more, check out exclusive in-depth stories from each episode on fastcompany.com. And to hear the next step in taking a company from zero to IPO, make sure to subscribe and give us a good rating on iTunes, Spotify, Stitcher, or wherever you listen to your podcasts. I'm Joshua Davis.
47:11
Frederick
And I'm Frederick Harris, and we hope that you'll turn in for our next episode, "The 'Oh Shit' Moment." Thanks for listening.
TEASER FOR EP 5
47:20
Amy Pressman
We knew that there would be no funding for startups. The bubble had been softening, now it was completely deflated.
[ "Music Fade-Out" ]
You have to believe in the technology and the product, and the value proposition you have for the customers, and if you believe in it enough, that passion oozes out of you when you're in front of the customer.
Carl Eschenbach