Zuora and Integrate

You're listening to Zero to IPO. I'm Joshua Davis, the co-founder of Epic magazine.

And I'm Frederic Kerrest, Chief Operating Officer and co-founder of Okta. As you know, we're dealing with a global pandemic and we're excited to bring you more episodes of Zero to IPO, but we had to figure out how to record and isolation.

So if it sounds like we're all in different rooms, it's because we are. Now, let's get on with our show. Well, today we have Tien Tzuo, on the show and Tien is the CEO of Zuora, and amongst many accomplishments is one of the most noted people on the idea of the subscription economy. Zuora is the leading way for companies to launch and manage subscription services. He is a noted expert on this, but he's also the 11th employee at Salesforce going way back.

Wait wait wait before you do that, he's the best selling author on the subscription economy. Let's be really clear about that.

Yep. A hundred percent totally clear. One of my first thoughts, was like, "Wait a second Tien, you're the 11th employee at Salesforce. You're the first CMO at Salesforce." Why aren't you on a beach somewhere?

Why are you even working? What's wrong with you?

What's wrong with you? Why are you on our podcast?

There's a lot more to do. There's a lot more technology to build. And there's a lot more things that we want to do in the world. So we're busy.

We're going to get into all that. We want to pick your brain. We want to learn as much as we can from you, so let me introduce our other guests. Jeremy Bloom is our first Olympian on the show, Freddy. And as if that wasn't enough, has also played in the NFL was drafted initially by the Eagles and then played for the Steelers as well. Most notably, you're the CEO and founder of Integrate, which is a company that helps other companies automate demand marketing. And for our listeners today, we're going to be talking about a stage of growth, about a set of problems and challenges that occur not in the early days because Jeremy and Integrate are beyond the early days, they've raised a significant amount of capital. And so I think the question on the table is, "How do you grow at a high cadence after you've made it through the initial stages of raising money?"

It's been a journey we're somewhat described as an overnight success. 10 years later. It's taken us a while to get where we are phase of the company. We're about 300 people. Our mission is to move everything into a central database in the cloud so that we can make more informed decisions on where we should be spending our marketing dollars to create revenue.

Let's get into the meat here. So in the last 24 months, Integrate has tripled in size. As we all know, we are in a moment of real turmoil and market instability. Tien, you were at Salesforce in 08, you're leading Zuora through the current turmoil. What kind of lessons can we gain? How aggressive or defensive should we be in moments of market instability?

At Zuora, we actually started at the end of 2007. And so we lived through the 2008 crisis where the prevailing wisdom was, "There was never going to be any cash."

Were you like, "Oh, it's over it's over?" Or were you... What was your mindset?

Well, we didn't plan to start the company in a chain recession, the economy started to look really good. And we got a little lucky, right? A little luck always helps along the way. We closed the series B in December O8 and I think we had signed the term sheet and then Lehman Brothers collapsed and the economy started shutting down. We were a little worried for a while that we actually wouldn't get the cash. I don't think we cut anybody, but we really sparked about saying, "How can we use the resources we have? How can we use the people we have?" And they just focus, focus really on customers that really needed what we were doing, focus really on making sure we service them well, making sure that we were spending our R and D on the most valuable things and we just continue to acquire customers, prove ourselves, be smart about our cash, which is nice actually, right? And all the times when things are actually going crazy around you, especially as a tech company, there's such a big push to hire, to grow. And so moments like these where that pressure is off right now, it really allows you to reflect and build quality systems, right? And build a foundation for how you want to operate that last years and years and years.

Jeremy, a question for you in your mind right now, are you thinking offensively or defensively?

Yeah. We're really thinking offensively. We're grateful to serve the enterprise, right? So when you look at our customer base, it's Salesforce, it's Microsoft. These are big companies, right? So they're going to make it through we're well capitalized to be able to make some R and D bets through this downturn. We're also able to continue marketing and maybe even marketing even harder but differently. So I think a lot of reinvention is going to happen. Rearchitecting is going to happen. It's pretty staggering the amount of innovation and change that's happening right now. And sometimes we can't see it

When you were skiing as I understand it, you had structured your whole skiing career around the idea of winning an Olympic medal. That was your goal. And you actually-

That's pretty good goal. Josh, I just want to say, That's a pretty good goal."

That's pretty good goal.

It just want to be clear.

And Freddy will never make it anywhere near the Olympics. So-

Why you got to be like that? That's not cool.

You know, so he's never going to realize that dream, but you had the chance you had worked your ass off for years and years and years to get onto the top of that run to make it to the podium, to get a medal and things I don't think quite worked out. And so, as we talk about crisis leadership and how do you adapt to things not going the way you went? How did that play out for you in your own life?

I came into both Olympics as the number one ranked skier in the world and made very small mistakes. And very small mistakes my sport which by the way, is 22 seconds. So you work your entire life for 22 seconds. And if your knees break an inch, you're off the podium. And so in Torino, when I didn't win an Olympic gold medal, and I knew that at that point, my ski career was over. It was a hard pill to swallow, but what it forced me to do is understand how to use these moments in our lives, these inevitable moments in our lives to learn.

And in your case, after the Olympics, you left Italy in a matter of days and just kind of put it behind you.

Well, what I did is I said, "I'm going to take 48 hours." I came up with this rule that in Torino, is 48 hour rule for me. And I'm like, "I'm going to feel bad for myself for 48 hours. I'm going to do whatever I need to do. I'm going to cry, whatever it was." But then prescriptively, I'm like, "After that window, I'm moving on a thousand miles an hour ahead. And I'm taking the lessons that I learned and I'm moving." And yeah, I woke up the next morning. I flew to Indianapolis for the 2006 NFL combine and met 32 NFL teams. And then a month later I was with the Eagles. And so I was onto the next thing and trying to build a career in the NFL and learn the ropes and get to know the people and have fun and enjoy the ride.

Well, there is something to that, when I listened to that Frederic, if you think about, all the times that people think building these companies are, it's a straight line, but we almost failed a bunch of times at Salesforce, right? I'm sure you face down failure in Okta multiple times. And so it sure sounds like that experience, you couldn't ask for better preparation to do what we do, which is to try to build these startup technology companies, where there are times where you just feel like you're lurching from crisis to crisis, but you pick yourself up and you have to show some resilience and you power through. Jeremy, you drew a great contrast, I think between skiing and football, right? In the two different football teams that you were on, it just, it felt like football is much much more of a teaming sport. And there was a number of lessons that you learned from that.

Yeah. Tell us about that. You've talked about that in the past. I love that.

Yeah, it's interesting. And I didn't know it at the time, right? Because I didn't know about organizational design or leadership as it relates to team dynamics in the sense that I do now. But when I reflect, it's super clear. When I was drafted the Philadelphia Eagles, that was a very top down run management team and it was fear based leadership. So we would often hear in team meetings, "Hey, if you don't do XYZ, you're out of here, there's a hundred guys that want to replace you." And I don't think it was out of ill intent. I just think it was like their philosophy, right? And it was just really weird. It led to this really weird team dynamic because in the locker room, everybody was looking out for their own job. They're on their little islands, they're about themselves. They put me first, they're worried about getting fired. And so you didn't feel like you could really lock arms. And then I went to the Pittsburgh Steelers, totally different organization. The Rooneys' have owned the team forever. Mike Tomlin is a transformational leader, probably the best leader I've ever been around. And in the team set the goals, the team set what we would describe as OKRs and it was Hines Ward. It was Troy Polamalu who's Ben Roethlisberger. It was you felt like it was a family. And everybody knows in the NFL that NFL stands for "not for long". Because, the average tenure is two years. Everybody gets that it's competitive, but there was this comradery this family feel to it. And that year, the Steelers won the Super Bowl with what I would describe as a less talented team than what we had in Philadelphia. So that really stood out to me. The other thing that stood out to me, and this was a steep learning curve for me. I'm used to being around football players and Olympians. And I would relate them to our sales team. They have the same mentality of the go get a mentality. You can throw a big idea on a whiteboard and they're going to go charge it, right? And so that's how I initially led the company. And I tell you what, I got half the room, super excited. And the other half of the room scared to death. All my engineers-

Engineered me.

...hated me. They're like, "What is this… I don't know how to get there… one plus one doesn't equal two." And so I had to... I had to really learn how to... that everybody likes to ingest information in different ways. And I actually went and got certified for Myers Briggs because of that principle problem. I couldn't figure out how to motivate or talk to, or be effective with primarily the engineers. And that's been a steep learning curve for me. Haven't nailed it yet. Think that I'm getting better, but would love some insight from you guys on that topic.

Hey, Tien, I want to go back actually to something that you commented on. And I'm wondering if you can expand on it, which is, Jeremy was describing how he was giving his amped up leadership talk and half of the crowd didn't respond. You guessed that it was the engineers.

Yeah. You do have to recognize that they're very very different. Sales people are... Tend to be about the win. The engineers get their energy from... obviously they want to win too, right? You see how highly competitive the engineering, but they want to create something, right? They're more motivated in the realm of ideas and creation and they want a logical structure to help them decide what it is they need to do. The value that you provide to the engineer ultimately is how to help them think through the world, right? And so they're looking for... Okay, "Help me break down the world, help me understand why we're investing the investing in the areas? What do the customers really really want? What are the competitors really doing?", right? And they want to really understand that so they could map that back to, "This is why I'm building this feature. This is why I'm building this code. And if I deliver these features, then I'm going to have a world class product that is being used by thousands of not millions of people, right? This is how I create a product that meaningful in the world." And that's really where they're getting their motivation from. And if you're in the field, right? And you know what the customers want, that is the value that you bring into that conversation, right? And so if I was a sales oriented leader, sitting down with the engineers, I would grab a bunch of them. They love the energy, by the way, right? They like that positivity. I would just grab lunch with them and say, "Hey, here's what the customers are seeing. What are you working on?" Right? Let me try to relate it back to how the customers will experience it, right? Let them be able to see how their products and technology is being used in the world and why it's important because at the end of the day, what engineers really really want is they want to know that what they are working on is important. And it is.

I think that's an interesting and good point to highlight, which is, "If you are a more of a sales oriented leader, a key role that you can play is to bring the outside world to the engineers and be a window for them outside of their immediate creation."

That's right. We spend all our hours sitting here, building this product, writing this code, "Tell us what happens to it when it gets out in the wild."

I want to segue into another topic here, which is that Jeremy and Integrate have bought two different companies, one of which is in London. And so Integrate is now in the process of expanding overseas. Zuora, Okta have some experience with this. And so I want to ask you, Jeremy, what are some of the growing pains that you feel with international expansion? And let's hear from Freddy and Tien about how we might be able to address those issues.

We looked several years what's the best way to expand internationally with your first step. And there's three ways to do it. You either hire an MD over there and you build around that. So in a managing director or you bring somebody from your home office that is a good culture keeper that can build and you build around them or you acquire something. And we found a company that we really liked the product that we loved, that fit inside of our demand cloud van marketing cloud, that we knew we needed to build it. At some point we just... It would have taken years to build. And there's about a 40 person team. And I think I'm under index like, "Oh the cultural integration part of it" because I'm thinking UK, it's English speaking. I looked their cultural pillars. I'm like, "Yes, they align with ours." I spent a ton of time with their founder who is a wonderful executive and we were both like two thumbs up like, "This cultural integration is going to be simple." And it wasn't. And I thought that for the folks that wouldn't be part of the journey, maybe they would leave within the first couple of weeks, but it really took us like eight months, nine months to really turn the corner and find out who wanted to be part of this journey and who didn't. So I would love some insight. What would be helpful from Tien or Freddy, the next area that we're expanding in either through acquisition or hiring is APJ. And I would love to hear how any-

APJ, being Asia Pacific Japan.

Thank you. Sorry, Josh. Yeah. So the Asian region, and so we'd love to hear any insight as it relates to what you guys have learned as you've expanded your businesses into Asia.

We expanded internationally pretty quickly. We started European operations starting in London, but moving into France here. And then we expanded to Japan and Australia. And I probably modeled it after Salesforce. Salesforce went into Japan and really really quickly within the first year. And I'd say there's definitely regional differences, right? How you establish trust on a day to day basis, winds up being very very cultural and you have to be able to connect. And so if you're going to go into APAC, you will probably personally have to commit to being out there. A little hard right out, with all the travel lockdowns. And it's something that we have to figure out, but that's really really important. But once you transcend that, what you realize is at the end of the day people are people, right? And once you have that trust established then it's really just a matter of getting down to the micro, right? What part of our process, whether it's how we find customers, how we connect with the customers, right? How we communicate to the customers. How do we translate that so it all works on a local level, right? And so having constant dialogue is really really important. The hard part is really people carry around these assumptions that they don't realize, right? And this has happened to us all the time. And so in your UK company, it all looks good, but it turns out that you have to unpack the assumptions that they have because when they have the assumptions in terms of, "Look, I expect to have these sales tools and I sell, I expect to have this freedom in terms of decision making." It conflicted. And you didn't realize this right with your culture. And they don't really realize that it's a conflict. And they just know that there's a lot of friction in how they work. And the danger is they lead to a conclusion that, "Oh, we're not a good fit, right? We're not a cultural fit or headquarters doesn't really care about us." And you've got to sort of unpack all those things and get at the root of what the hidden assumptions are. And then you can align folks right to a new collaborative path forward.

And Tien, you're saying, it's not necessarily that it's not a cultural fit. It may be something as simple as we thought we were going to have these sales tools. And we don't

It's usually that. There's a foundation of trust that you have to build, right? And then beyond that it's usually something in the friction and people leap to a conclusion that, "Oh, we're just not that important to headquarters, right? Or we're just too different."

Well, and then if headquarters doesn't actually respond, then it proves the assumption.

It starts to reinforce it. That's exactly right.

Freddie.

There's a couple of things to Tien's point cultures are very different. Just Europe alone is 27 different countries, languages and so forth. For example, in America, at our headquarters and our other big offices, Chicago, Washington, D C it's employees really like to have lunch brought in. So Monday, Wednesday, Friday, we bring in lunch. It's an opportunity for everyone to sit together. Engineers can sit and talk to salespeople. Like Tien said all the other cross pollination. Well, actually we brought that to France and we said, "Hey, we're very excited. We're bringing you the same thing." And the French were like, "We don't like that." We're like, "What do you mean? You don't like the lunch?" They're like, "No part of being in France is I'm going out to lunch. I'm having a glass of wine. It's an event it's part of the day." So those cultural things, if you've got in American just being like, "Damn it, Paris office, you're going to eat lunch in the office." The Paris is like, "This is terrible." And then finally, the last thing I would say is you just have to emphasize and repeat over and over and over what Tien said, which is, "I actually tell people all the times at all, hands, if you get two phone calls or two emails or text messages or Slack or whatever, from two people, and one of them is maybe in the next time zone over, or maybe another local North America office and the other one's from Australia or from Munich or from Japan, answer that second one first because the first person is going to know how to get stuff done, answer the communication from the furthest geography that you can prioritize that and show everyone that's the way that they should approach life."

Did I hear you just made a mistake in the French office?

I wasn't paying attention that day. And someone decided that was the policy. And as a French when I stepped in and said, "No no no zay want to go out, zay want to drink the wine, they want to smoke the cigarettes." And everyone said, "Okay, that makes more sense. We got rid of that policy."

That's really good. Good stuff. I appreciate it guys. And Freddy, I'd never heard that advice of getting back to the person at the furthest time zone first, that resonates. That makes a lot of sense because those are the people that maybe don't know, but also feel most disconnected, right?

Yeah.

And actually, tactically, if you think about it, tactically, like imagine you're a sales person in Europe and you send a question and that question doesn't get answered right away. You wake up in the morning, it's now midnight in North America. You have to wait all day till 5:00 PM the end of your business day for America to wake up, you waste like literally 24, 48 hours cycles, just waiting for feedback.

Yeah. It makes a ton of sense. And we do have some pretty good balance at Integrate because we do have physical offices and we have an office in London for 40 people. We have an office... Our headquarters in Phoenix, Arizona. So we have about a hundred people there. But if we find great talent in another state where we don't have a physical office, "Great, let's bring them on board." Tien. You mentioned that at Salesforce, you guys went to Tokyo first and at Zuora, you went to Tokyo first. I'm interested in if you were maybe at your next startup and you're thinking about expanding into Asia and you could pick one city to do it, at least in the beginning, maybe the city with the least amount of red tape or friction or country, or you think about Australia and Sydney, you think about Singapore, which is an expert community. You think about Tokyo, which has its own set of cultural challenges. Maybe China. I know you guys have some employees in China. How would you think about prioritizing or dissecting those four locations? And which ultimately would you choose to open your first office in?

I think the first cut of the world is actually not geography. It's actually language, the language that you interact with the internet. And so Australia, New Zealand are going to operate a lot more like the U S and the UK than anything else. So I know they're physically over there. The time zone is definitely that, but it could to be a lot easier for you go to Australia, New Zealand. Now, the market's only so big, right? Australia is think is 30 million people, right? The U S is 300 million, but it's a low hanging fruit for a startup. Beyond that you really have to look at the industries that you're pursuing. And if you truly have a horizontal product and you're gnostic to it, then there's something about Japan as just being a more mature place, a big market. And because of Salesforce, their adoption of SAS is fairly good. Now, there's definitely a lot of cultural nuances there. It's the one place in the world where there's still a tower records. They still buy CDs, right? As an example. And so you have to be sensitive to some of the local aspects to it. The other thing about Japan is if you look at a European countries, it is much easier to hit the countries where they have one big city, right? So the UK it's London and the Francis Paris, if you go to Germany, there's like four big cities. The nice thing about Japan is one big city. If you go to China, it's a lot cities, right? In Singapore, as a market is small. So Singapore is really a launching point for you get into all these other places. And so now you're talking about a lot of different cities. And so the investment required to get things going it's just simply higher. That being said, Japan, is in many ways more on a metaphorical island, right? Not a physio... Obviously it's an island too. And so you do have to invest a lot more in a local infrastructure and you have to invest in a team that's used to dealing with U S companies. And so there is a bit of a higher bar there. So those are all the calculus that you have, right? As a SAS company, we just figured, Salesforce is dominant enough there where they've taught the whole country, the importance of SAS. And it was easier just to follow that.

I feel like if we're going to talk about international expansion, we got to say a little bit about China, Tien or Freddy. What... When you look at expanding there, how do you deal with that?

Teen? Did you have part of your original engineering organization was there, right? If I'm not mistaken?

Yeah. We have a big engineering site in China and R and D site. China is just a unique market. And so it's not... It's the rules of other places are going to be different and China will favor local incumbents. And so you just got to know that, right? You got to know that going into it. And there has not been a huge explosion of SAS companies. You use their Stephanie signs, right? But you can see there's a Chinese version of Twitter. There's a Chinese original LinkedIn, there's a Chinese version of Amazon. You don't really see the Chinese version of Salesforce. There's certainly lots of small companies that are SAS companies, but it hasn't been the same dimension.

listening to what you said, Tien, about how you analyze all four of those cities. And it makes me think, "What are you going there for? What's the top priority, right?" For us, the top priority is customer success in the time zone. So yes, it's about growth. Yes. It's about new bookings and revenue. But when you look at our customer base, our 250 customers, a lot of them are doing activity and in Asia today. I think that's why we're gravitating towards Singapore because it's the next pack community it's centrally located. It's, you can get to Australia relatively easy. You can get to Japan relatively easy. But it made me think if our only goal was new bookings or expansion or revenue growth that the addressable market in Japan is much much higher than it is in Australia. And certainly much much higher than it is in Singapore.

It is. But the low hanging fruit is probably Australia. So if you're looking at short term bookings, Australia is going to be easy, especially for your product, right? Marketing departments, digital marketing, the Australians would just gobbling stuff up. Just like the Americans and the Europeans.

Yeah. That's what we found as well. And you can also go a long way there without actually having physical data centers there or hosting products there. And you don't have to do any of the translation as Tien said up front because they're all speaking the same language. And I think that makes it a lot easier. It is a smaller market. It's a capped market, but there is enterprise, there is big mid market there. And there's plenty of enterprise software as a service that have done the avant garde work to open up that market for you. It's going to be very receptive. I agree.

Now, I will say right in the current environment, my guess is that cross-border travel is going to be limited for 24 months. And so I think you got to think about what that means, right? So you've got to build... I think if you go back to the 90s, the way Oracle ran was the different countries were their own fiefdom. And I don't know we're going to go back that extreme, but the last 20 years has been more centralized single global company. But I think the pendulum is going to swing more towards regional authority.

And how does that impact the way you think about your own business?

Well, so this is oversimplification, but the way you swing that is you need to have higher level metrics pushed down to a local leader that operates more like a GM, right? And give them the freedom to make their choices [crosstalk 00:27:53]

And GM being general manager. In other words, somebody is running their own show.

Yeah. You give them a... The devil's in the details, right? But at a high level, you give them their own PNL. You say, "These are the things that we care about customer sat. We care about profit loss. We care about bookings. We care about margins, whatever margin structure, right? that you have, And these are the rules that we want all of us to follow." But within those rules, you've got a lot more local autonomy. It might mean for example, that you need to put a finance person in the remote region because they need that. They need that in order to have a local autonomy.

I want to thank both of you, Jeremy and Tien for joining us. It was a really insightful, really practical conversation. And, in fact, it's the best that I could hope for on this podcast, which is looking to be really boots on the ground. What should we be thinking about, what should we be doing? So I want to thank both of you.

This is great. This is fun.

Pleasure guys. And I echo that Jeremy, Tien. Thanks all for taking time out of your busy schedules. We greatly appreciate it, supervise people. I enjoyed it, but I think it's also going to be super valuable for everyone listening out there, walking away with some very good tactics and strategy on different approaches. So thank you very much.

Freddy, I think that was probably one of the most classic Zero to IPO episodes we've ever had.

Yeah, I agree. That was amazing.

One of the things that I took away from it was we are in the midst of the pandemic, of course, and hearing both Jeremy and Tien, talk about building a company, starting a company, even in the midst of difficult times, whether it's now or the O8 crisis or the.com crisis. Those are the times that the next generation of great companies are really built. And another thing that struck me that I thought was very wise on Tien's behalf was when he talked about bringing the outside world into the engineering team. If you're the CEO, who's not necessarily an engineer, but has more of a sales focus. You can be that person who translates the outside world and says, "Look, this is how people are reacting to your product. This is how it's succeeding. This is how it's failing" and give them that perspective outside of their desk. What are some of the other takeaways for you from the wide range in conversation?

Well, I think obviously the one about expansion. How do you expand internationally? I think you heard a number of different strategies. Jeremy found a very good way to do it by purchasing, acquiring a company that was already international and embedding that culturally, he talked about those challenges. On the other hand, Tien had very specific arguments on how to do it. And obviously at Okta, we'd done a lot of organic growth into those different territories and just being sensitive to the different cultural aspects. Of course, ensuring the French can go out to lunch and have a glass of wine.

That is it for this episode of Zero to IPO, please, if you liked what you heard, you can find us on Spotify or Stitcher or wherever you find your podcasts. And we will see you on the next go round.

Thanks a lot for joining us. Look forward to speaking with you all again soon.