Episode 2

You're a Genius

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

Featured on iTunes' Business New and Noteworthy

Millions of businesses are dreamt up in the shower, at coffee shops or during happy hour, but most never materialize. In episode two of Zero to IPO, we talk to the founders of Salesforce.com, ServiceNow, Jawbone and Canva about their a-ha moments, and how they turned their ideas into successful companies.

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The sun is shining, the birds are chirping, and you’ve launched your new company. Sure you’re working from a folding table in your uncle’s garage, but you still call it your own. Maybe you've raised some money. You’re designing a website and recruiting your first employees. But how do you run payroll? And what do you do with lunch receipts? In this episode, we’ll get into the nitty gritty of the early days: renting your first office, landing your first customers, and how not to run out of money.

Guest List

Alexander Asseily

Founder of technology company Jawbone and Zulu Group

Parker Harris

Cofounder and CTO of Salesforce

Fred Luddy

Founder of ServiceNow

Melanie Perkins

CEO and co-founder of online design and publishing tool Canva

Transcript

00:03
Frederic
Everybody who has taken a shower, has had an idea. Your idea is worth the same as everybody else's in the shower. Your idea is worth zero.
00:11
Melanie Perkins
I love actually spending a lot of time imagining what the world would look like. I'm an incredibly optimistic person, so in the world, the future is always very efficient and very kind and everything will works well together.
00:23
Alex Asseily
We just had a vision, but we hadn't matured yet to understand that taking it inside and turning it into a business was kind of the hard bit.
00:33
Frederic
Welcome to Zero to IPO, a podcast that dives deep into the many steps it takes to turn a great idea into a thriving company. I'm Frederic Kerrest, co-founder of Okta.
00:44
Joshua
And I'm Joshua Davis, the co-founder of Epic Magazine and a contributing editor at Wired.
00:49
Frederic
Today on the podcast, we're talking about the "aha" moment, that magical moment for an entrepreneur when you realize you have a brilliant, original idea that just might work. But what comes next? How do you convince other people that your idea is great? How do you get investors to listen? And Josh, how do you make your brilliant, original idea a reality?
01:08
Joshua
In our last episode, we heard from Mark Andreesen about what the future might look like. And now in this episode, we're going to take the next step and look at exactly what it takes to come up with that idea. And sometimes, as you will hear, the idea is the easy part.
01:24
Frederic
Actually, the idea is always the easy part.
01:27
Joshua
Well it's not but then it is. Yeah it's the easy part once you've decided on it [crosstalk 00:01:36] the hard part is always what comes next.
01:37
Frederic
I think for the last seven years, the CFO at Okta, my friend Bill Osh has said to me, "This, Frederic, is the most important year". Every year he said that. Finally two years ago he said, "No, now I'm really serious. This is going to be the most important year".
01:55
Joshua
I totally agree. It's always about what's next.
01:59
Frederic
It's always about what's going to come next. That's going to be the hardest one. In today's episode, we're going to hear from a number of entrepreneurs, who have had the opportunities in front of them, and they've made the right decision, the right idea, the right business to go pursue successfully.
02:14
Joshua
We're going to talk to Alex Asseily from Jaw Bone. We're also got Fred Luddy, the founder of Service Now. Parker Harris of Sales Force, and Melanie Perkins from Canva.
02:24
Frederic
Last episode, we heard from Mark Andreesen about how an entrepreneur needs to go deep on one idea, iterate until they get it right, and then hope the timing works out.
02:33
Joshua
We're going to start this episode with Alex Asseily from Jaw Bone, makers of the famous headset. We'll be hearing from Alex throughout this season about Jaw Bone's ups and downs, and eventual bankruptcy. But today, we're going to start at the beginning of the story, and hear about their false starts and pivots as they worked out the idea.
02:58
Alex Asseily
The difficulty when you're quite a young entrepreneur, especially in that period, the late 90s, early 2000s, is there wasn't great feedback loops for whether you had a good idea or not. So in the early days, it was more like, we just had a vision. Mobile is going to be huge, people are going to talk to each other, therefore they want to have clear lines of communication. And if you're going to be mobile, you're going to have to get rid of noise and therefore you have to have good noise suppression and you have to have good headsets, and all the rest of it. So that was in essence, the insight. But we hadn't matured yet to understand that taking an insight and turning it into a business was kind of the hard bit.
03:37
Joshua
Did you have any business background?
03:39
Alex Asseily
No.
03:41
Joshua
You didn't know what you were doing. But you felt you had some confidence in your insight I suppose, and you were like, I'll figure out the rest.
03:48
Alex Asseily
Yeah, so the idea for Jaw Bone actually came right before the BMW thing. It came right at the end of undergrad, it was basically my undergrad design thesis. And I'm not entirely sure that the idea I came up with was particular good.
03:48
Joshua
What was that particular idea?
04:03
Alex Asseily
The idea that I presented was basically an interface involving something that looks a lot like the Apple Watch, connected to a headset where you would control your digital life through this watch and a headset. I was enthralled by the mobile revolution, I think. The idea of having wearable technology was exciting to me, at least at that time. And actually, it's pretty funny, 'cause I'm sure I can find people who were in the presentation in 1997, who heard me pitch the idea and there was six judges, and I presented this multi-modal wearable user interface, and there was just complete silence. And then some woman felt bad for me and she was like, "Is there any part of this that you think is actually possible in the next, ten, 15 years?". And I'm like, I haven't thought about that yet. I think I got a B minus or a C, I think, on that. It was my worst grade in all my engineering classes I had done at Stanford and it was my final thesis.
05:08
Joshua
So you take that, the worst grade that you had gotten in your entire college career and you decided to turn that into a-
05:13
Alex Asseily
I think I did, I think I got-
05:15
Alex Asseily
I think I got worse in my religious studies, I think I did worse. I was unabashed by the whole thing in the sense that I knew I wanted to set up a company, I knew I wanted to do my own thing. Wasn't sure how to do it, but by hook or by crook, we'd figure it out.
05:29
Frederic
There's this interesting process. You have this original idea, you think you're a genius, you've got this big idea and then there's this period of time when that original idea morphs, and that sounds like the process you went through.
05:45
Alex Asseily
Yes, and this is where we start to have traction. And the traction started when a great professor at Stanford called Pierre Khuri-Yakub, not the guy I got a B minus. He said, "You may want to go and visit these guys at Lawrence Livermore Labs, I'll make a connection". So I trundled off with Hussein, my co-founder, and we went to see Lawrence Livermore Labs and we got presented this technology which was basically a small radar device, which could pick up voice signals without picking up the background noise, basically. So by that time, I think we had already decided we had to abandon the watch and we had to focus on the headset.
06:27
Joshua
Were you at all sad about abandoning this genius idea?
06:31
Alex Asseily
Perhaps one of the big lessons I've learned in the 15, 20 years I've been doing this stuff is, how to help with myself and other people I'm working with, think realistically about stuff. Having lived for periods of time, very unrealistically. I think that that period was kind of a big lesson. And saying, great vision, we share the same view of the future but what is my role? What piece am I going to put in the puzzle? Because I can't do the whole puzzle. In a way, what I was basically doing with my vision was, here's the whole puzzle.
07:05
Joshua
And so at the beginning you were like, I've got this watch idea and people would be like, that sounds like maybe too grand a vision?
07:11
Alex Asseily
I think people loved the vision, but loving a vision doesn't mean they want to invest in a business.
07:18
Joshua
And you weren't getting any money.
07:21
Alex Asseily
We weren't getting any money, but what happened was we did a deal with Lawrence Livermore Labs for this technology that I mentioned, where we said, we want to license this technology exclusively. We can't pay you all the money now but we're going to raise money off the back of the license [crosstalk 00:07:37] and they went for it. The great irony though, the great irony of Jaw Bone was that in the end, that technology, its own real utility for us was in helping us close the first round of funding.
07:53
Joshua
You dropped it, you dropped the technology.
07:54
Alex Asseily
We completely dropped it. We dropped the micro-radar thing.
07:57
Joshua
That never ended up being part of the product but it got you that initial interest.
08:03
Alex Asseily
Yeah, it was basically-
08:04
Joshua
It was legitimacy.
08:05
Alex Asseily
It was legitimacy.
08:07
Joshua
We've got this technology developed by a federal laboratory.
08:11
Alex Asseily
That's exactly right.
08:12
Joshua
And that sounds cool.
08:13
Alex Asseily
It sounds very cool.
08:14
Joshua
It's a good story.
08:16
Alex Asseily
Yeah, it worked. So we raised a million bucks on the back of that.
08:20
Joshua
So that was, you had this grand vision of wearables, a watch, a headset, this kind of ecosystem of communication. And that all went away, that genius idea got widdled down to one thing.
08:35
Alex Asseily
It got widdled down to a headset, which then got widdled down to a technology that went in the headset, which took out background noise.
08:41
Frederic
I think it's interesting, in these early days of coming up with the idea, to realize that you are at the beginning of what is likely a minimum five year journey. I think one big thing that Alex's story reinforces is that companies, especially enterprise tech companies, Josh, are almost never overnight successes. Why? It takes time! You got to find tune the model, you got to carve out the niche, and even after that you're still hoping you got the timing right, you're hoping there's a market there and the people are ready for your crazy idea. Was Facebook an overnight success? No. Microsoft? No. All the ones, well those are two different kind of companies. First of all, Microsoft is an enterprise software company, it took many years. Facebook, you need the viral social effect, it takes a while to kick off. So all the big ones, it takes a while to get going.
09:37
Joshua
You do see these kind of rapid uptakes in customers.
09:42
Frederic
Yeah.
09:43
Joshua
But that's not necessarily proof that the business is going to work.
09:46
Frederic
That's right. And you always do see that, if you're going to see that at all, you're going to see that on the consumer side, not on the enterprise side. Because MX is not going to be an early adopter to all these new technologies. They're going to want to see that the small and medium businesses have gotten it right, they're going to want to see the social proof in that, customer marketing is a huge thing. It takes a while. It also means, by the way, much harder to kill those companies. Once enterprise software companies get rolling, it's hard to take them down. Our next guest, Melanie Perkins from Canva, tackled the problem of the early idea from a different angle. She focused at the beginning on creating a vast vision for the future of publishing, but then implementing a very doable first step. Melanie, you started Canva. It had a slightly different, there's actually another company that you started before Canva. Different name, kind of a precursor to Canva. How did that all happen and then how did you end up pivoting? Talk us a little bit through some of those things so that we can get into the flow.
10:51
Melanie Perkins
So when I was at university, I was teaching design programmers part time, and I saw students really struggling learning the basics. It would take a whole semester just to learn where the buttons were to learn how to design anything that looked good. And so I thought that in the future, design would be online and collaborative and way simpler than it was. But I was 19 at the time and I had no business experience or any relevant experience. And so rather than trying to take on the entire world of design, took on school yearbooks in Australia. And started that company and had to become profitable really quickly because we had no outside funding. And then looked around after a few years, that was growing really well, and thought that surely this has been done before in other markets, 'cause people kept on asking to use that product for all sorts of other things, and realized that it still hadn't been done. So I then embarked on the journey of Canva, and spend some years raising funds, then another full year of development, and then in 2013 in August, we launched Canva to the world, which is pretty incredibly exciting. Right from the early days, we had plans to take on the entire world, and replace the future of publishing or become the future of publishing. But it started with yearbooks because that seemed like a really logical first place, because people had such a huge need, and they were also already paying for the actual yearbooks to be printed.
12:08
Frederic
Yearbooks was just the beginning. How far out, you said your plan was to take over the future of publishing. Did you have a five year plan? Did you have a ten year plan?
12:19
Melanie Perkins
I love actually spending a lot of time imagining what the world would look like, and I'm an incredibly optimistic person, so in the world, the future is always very efficient and very kind and very ... everything works really well together. And so I guess with the first few years of fusion, I spend a lot of time realizing, firstly when I was teaching design programs, it was seeing how difficult it was. And then over those first few years of fusion, really realizing just how complicated all of the different things were. And we also had a design service with fusion books. So we'd have a design service and then we also had the online system. And we could see the difference between those two things, what our professional designers were doing versus what our online system was doing. So over the years, we just kept on iterating and improving that. But then, when it came to going to San Francisco for the first time, that was when I had to take all of these concepts and theories and put them into one pitch desk and paint the future of publishing. So that was back in 2011, where I created that first pitch deck. We came runner up in a competition called WI Inventor of the Year, and we went to a conference in Perth, and there was a speaker there, Bill Tie, and when he was speaking, even though we had a startup for a few years, I had never heard of anything about startups or Silicon Valley or really very much to do with that at all. And then after the conference, I had a five minute chat with him and he said if I went to San Francisco, he would be happy to meet with me. And so I was like, I'm going to be in San Francisco, I'm just totally cool, just going to be in there. I sent him some dates. Little did he know that I was only going to do that trip if he actually said yes. And fortunately, he responded and said he would meet. And I said okay, oh my god, this is the biggest thing ever. Started putting together my pitch deck, printing it out on my printing press and then going to San Francisco. My brother was living there and studying at the time, and so I very fortunately had a nice living room to crash on for my three months stay there, which is quite funny.
14:25
Frederic
And what did you know about Bill Tie at that point? Did you know when you saw him at the conference, did you know all about him?
14:33
Melanie Perkins
He was just a Silicon Valley god in my head, really. I really didn't know anything about Silicon Valley, I didn't know how it worked, I had no idea about venture capital. When he said, sometime after, he was happy to fund me if I could find the tech team, I had no idea that that didn't mean that he was going to fund the entire company forever, that was kind of how I thought it worked at that point in time. I've since done obviously a lot more reading and learning on the topic. But at that point in time, he was just representative of this whole world that I knew nothing about. So the first pitch deck was quite bare bones, and then the second pitch deck I said to Bill, for some bizarre reason, that I was going to send it through to him by Friday. And so that meant that I ended up, I think I was working for 36 hours or something straight. I kind of lost my eyesight for a little while, which I don't recommend to anyone, and was kind of concerned whether or not it would come back, but it did. But he had his pitch deck by the Friday.
15:25
Joshua
And this pitch deck.
15:26
Frederic
Wait, you lost your eyesight while writing this pitch deck?
15:31
Melanie Perkins
So this is not recommended to try at home, but I was working way too much. I was going to every single conference I possibly could, tried to pitch people to join my team. For some reason I had set a deadline that I was going to send it through to Bill by Friday, and I just stayed up continuously until it was done to send it through by Friday, which I don't necessarily recommend. It was kind of scary, I looked in the mirror and everything was blurry. I finished the pitch deck and then I wake up and had good eyesight again, so I was kind of happy about that.
16:02
Frederic
Too much staring into the future.
16:03
Joshua
Wow.
16:04
Melanie Perkins
Yeah.
16:05
Frederic
But so this is the pitch deck that you're talking about that has this vision of the future and ... did you put a date on it? Did you say, in five years or in 12 months, this is where we will be. In five years, this is where we will be, in ten years?
16:22
Melanie Perkins
So that's been the one part of my pitch deck that has been consistently completely off. I've always thought things would happen in about 12 months, so in my first pitch deck, I thought that I'd have designed and built the entire feature of publishing in the first 12 months, but that has been, the only thing that's been consistently off is I always overestimate how much I can achieve-
16:41
Frederic
You would not a lot of [crosstalk 00:16:45] there's a trait there in entrepreneurs. You can see the future you just can't quite predict how, or maybe you think that it should happen more quickly than it does, because you're an optimist.
16:55
Melanie Perkins
That's exactly right. And you just imagine everything being able to happen instantly, but then if guess if it could all have happened in a year, it would kind of be boring.
17:04
Frederic
Alright. So now, it's seven years on. And you say you've only gotten through just the barest beginning of it. You also said you haven't revised it, you haven't touched it at all. The original business plan, you're still operating off of that original business plan.
17:26
Melanie Perkins
Yeah. Of course we've got more detail on it as we've gone, but the broad strokes have been there right from the ground, which I feel really grateful for. I can't imagine having a company that's pivoting all the time and changing. Our investors have invested in that vision, our team members have joined that vision, and I think that having that consistency has been really helpful, 'cause there's so many other things to not add as you're growing a company. I think having that one part being consistent has been incredibly helpful.
17:56
Frederic
So alright, we know it's all about having a great idea. You go to commit to agree that probably seems insane to everyone around you, and hoping against all reasonable hope that the timing is right.
18:06
Joshua
It's not just about the timing and the broader market, but maybe it's also about the timing of the idea in your life. Where are you at? What stage of life are you at? Are you in your 20s, are you in your 30s, are you in your 40s, could it be later?
18:20
Frederic
In fact, our next guest, Fred Luddy, he started Service Now much later in life.
18:25
Joshua
Let's hear Fred talk about the genesis of Service Now, which is now a multi-billion dollar enterprise IT company.
18:35
Fred Luddy
So I was unemployed, and I'm also a little bit anomalous in that I was unemployed and 49 years old. And I thought, well, I've worked for enough people, I have to see if I'm as smart as I think I am.
18:50
Frederic
You didn't want to get a job?
18:53
Fred Luddy
The whole notion of getting another job was just not appealing.
18:58
Frederic
Because there was another, I think, factor, to what had happened with the previous thing, which is you had had a sizable, let's call it a fortune, and it went away.
19:09
Fred Luddy
Okay, so yeah, I worked for a company called Paragon Systems. We built it from zero in revenue to six, 700 million dollars in revenue. We were a publicly traded company with a couple billion dollar market cap at the turn of the century. And the big challenge that the company had was, financial improprieties. It was all about revenue recognition. They were rev rec problems, so they had recognized revenue prematurely. And that's a deep subject, but in any case, once those terms, the fraud term, gets associated with a publicly traded company, things go downhill pretty quickly. And so the corporation went from having a market cap of 2 billion down to zero.
20:05
Frederic
It went bankrupt.
20:06
Fred Luddy
Zero, yeah zero.
20:08
Frederic
Zero. And you had some amount of equity in that company.
20:11
Fred Luddy
My equity that I was holding onto was worth about 35 million dollars at the time, and I was feeling quite fat and happy and it also went to zero.
20:22
Frederic
Some listeners might think, okay, you got to cover your ... pay your bills, get a job, get some income quickly.
20:32
Fred Luddy
Yeah. So ... I had taken a little bit of money from that and I also had a very lucrative pay package there. And maybe a lot of people will also identify with this, 'cause the lucrative pay package was actually the worst thing that happened to me, in that I was being paid, at that time, close to 800000 dollars a year, which I thought was, I come from Indiana. Nobody makes that kind of money in Indiana. You have to play for the Pacers or the Colts if you're going to make that kind of money. I hated my job, I hated every minute of the day, I hated it. I would rather go home and clean my bathroom than go into the office. But I was getting paid 800000 dollars a year so-
21:12
Frederic
What else are you going to do?
21:14
Fred Luddy
Good Midwest Catholic upbringing guy, you're going to get the 800000 dollars. So I put some of that money away, so I had enough money to probably last about 36 months before I was out on the street. But in any case, I find myself out of work and honestly, I've been a programmer since I was 16. And every day, I wake up and hope to get time to code. The same is true today as it was in 1972. And so my business objective was, I'm going to write some code that somebody will pay for and then I can write some more code. That was the only-
21:50
Frederic
That was the only business objective. The business plan was, create a virtuous cycle of coding.
21:54
Fred Luddy
That's correct. So the phases were first exploring all of the new technologies, so these are languages I had not yet learned, and figuring out what can I become comfortable with. And picking a set of those and then starting to simultaneously, what do I know and what do these languages, what do these technologies, what problem can they solve? So you get that symbiosis going. And started writing this platform, for lack of a better term. I demonstrated it, it was on a thumb drive, and I used to call it Service Now on a stick. Put it in somebody's laptop and-
22:36
Frederic
So you had a name for it, you came up with a name.
22:38
Fred Luddy
Yeah, I had a horrible name.
22:39
Frederic
What was the horrible name?
22:40
Fred Luddy
It was called Glide. Glide means to move effortlessly. And so glide.com though was taken so I called Glidesoft, 'cause Microsoft, Glidesoft, and my girlfriend looked at me and said, "Glidesoft? I can't think of one positive thing that comes into my mind when you say 'Glidesoft'". I think that's going to be an issue.
23:02
Joshua
So for our listeners, you recommend that you run the name of your company by your significant other right off the bat.
23:09
Fred Luddy
I think that's a brilliant idea, I think that's an absolutely brilliant idea.
23:13
Joshua
And then when you said "Service Now" to her?
23:16
Fred Luddy
She liked that idea. Who wouldn't want Service Now? I can't imagine. No, I'll have it later, please. No, I don't care for service. I'd just as soon do it myself. But in any case, when at first it was this Glide platform, and there was a couple of us trying to figure out, what are boundaries of this, what are the problems we're trying to solve? How far do we want to take this? How much leeway do we want to give every customer, how much technology do we want to expose to them so that they can participate in building out the applications? And if they're going to participate, at what level are they going to participate? So the first phase was really technological discovery followed by business problem discovery that the technology can actually, I think, it can actually provide some value to in a fairly obvious way.
24:08
Frederic
But talk to us at each of these stages about what you knew and what you didn't know. In order words, was it all mapped out and you knew exactly, okay, A,B,C,D,
24:21
Fred Luddy
Okay, so phase one is, we have 36 months of money.
24:26
Frederic
That's phase one.
24:27
Fred Luddy
We need money before 36 months. So we had better prove to somebody that we're doing something of value.
24:35
Frederic
What about or raise money?
24:37
Fred Luddy
So that was the somebody. It wasn't necessarily that we needed a customer in 36 months, but we knew that we needed something that we could demonstrate was going to provide value. And people all the time, "I had this idea", good, everybody who has taken a shower has had an idea. Your idea is worth the same as everybody else's in the shower. Your idea is worth zero. And if you have an idea that's a little more articulated, maybe you have a little proof of concept, that's worth one. If you have a demonstration of something which is about to come to market, that's worth 100. And if you have two customers, five customers, that's worth 100000. So we wanted to get to the point where we had 12 customers, and then we were going to go look for money, because we felt, even if we can't articulate this extremely well to the people who are doing series A investments, we can say, talk to our 12 customers, and let them tell you why they think this will be of value going forward.
25:43
Frederic
So a lot of times, when people are starting companies, they're thinking about market size. They start with, what's the big market that I can go after, and then they go into, what are the business problems that are out there that I can solve, and then they go into, what's the technology that I should use to solve that? What I just heard you say was, we have some great technology ideas. Now we're going to go find out exactly how they fit into these business problems.
26:07
Fred Luddy
Yeah, if I gave the impression that that's how it worked, that would be exactly wrong in my estimation. Because from 1972 until this time, 2003, I had pretty much done the same job, I had just done it in all sorts of different technologies, and I had gone through four generations of, we build this this way, but we're still solving the same business problem.
26:28
Frederic
So you were an expert at those business problems.
26:30
Fred Luddy
Yes.
26:31
Frederic
You just said, here's a much better way to solve these business problems.
26:34
Fred Luddy
Yes. So here's the next phase. And we were very lucky, we knew what problem we were going to solve but we wanted to do it differently, we wanted to do everything differently than it had been done before.
26:46
Frederic
And you had also been part of these past generations of this same business problem solving technology, so you knew all the pitfalls.
26:52
Fred Luddy
Yes.
26:53
Frederic
You know how it was slow, it was hard to use, it was expensive, it was cumbersome, it couldn't be upgraded. So on your whiteboard, you had a checklist of ten things, these are the biggest problems the last generation. Let's start with these as designing concepts.
27:08
Fred Luddy
That's very true. We did have a very different perspective, number one, our user interface was the browser. That was blasphemy and heresy right there.
27:19
Frederic
Back in 03.
27:21
Fred Luddy
A browser? Nobody is going to use a browser as an interface, that's just Looney Tunes. Number two, we weren't going to let them install the software.
27:30
Frederic
It was going to be on the cloud.
27:32
Fred Luddy
We had no idea what it was going to be called. What we knew is we were going to stick it in a server and that server was going to be our server, and we were going to maintain the server because we couldn't teach 1000 companies how to maintain our software. And it just didn't make any sort of economic sense to us. Third of all, regarding the upgrade issue, we wanted the system to be upgradable at any moment in time. And it would roll forward in a way that wouldn't harm the current user community. So that was also a philosophy that we adopted early on, and in fact, in our first 12 to 25 customers, we used to have a release of the software every week. Jeez, that's horrible, you're changing version to version. I don't know, what version of Gmail did you use today, right? What version of Chrome did you use today? Do you know that you're using 70.3? 'Cause I don't think you do. So if you build the software in a way that works, nobody cares that you're going, versioning. It's when it doesn't work or it changes behavior and does things that aren't expected, that's when you lose the trust of your customer and you can no longer keep it up on your upgrade path. So our upgrade path was, it has to be simple, but it also has to work.
28:51
Frederic
So Josh, I think Fred's story here demonstrates something quintessentially true about enterprise software companies. It shows the importance of the experience of knowing the marketplace, of having that deep knowledge of the customer, the problems, the needs, the solutions, the offerings. It's really about how you're going to help them solve those problems you're facing.
29:10
Joshua
There's a big difference between starting a business focused on the consumer market versus the enterprise market, the market targeted at big businesses. What is that?
29:18
Frederic
It's funny. It's almost, if you think about it, you want consumer companies to be started by young people. Why? Because I'm 40 years old, I don't even know what they're using anymore. People show me their phone and I'm like, "I'm an email guy, don't try and have me use all these new applications, they don't make sense to me. I'm old". But when it comes to enterprise, you think about large companies, you think about what they're trying to do. They want someone who understands where they've been,
29:40
Joshua
They want old people.
29:40
Frederic
They want old people, they want people who understand the market, who have seen the problem, who have been inside those companies, who understand what they're trying to do. The opportunities, the risks, and what they really need to do to solve some of these big business problems. Here's an example. If you take a customer relationship management CRM software, where companies buy this software so they can see what their customers are doing, they can track their customers, they can sell them more things, they know when they're up for renewal. In a previous generation, it was done on premises. You would buy the software, you would install it, it was sold to you by companies like C Bone and Oracle, and then along came salesforce.com. The people from Sales Force actually worked at Oracle before, and they saw how it worked. And they said, there's got to be a new way. We're going to deliver it over the internet. And that was the innovation there.
30:29
Joshua
Freddy, since you mentioned Sales Force, let's get to our next guest, Parker Harris. For those of us who maybe need a refresher on Sales Force, it's the multi billion dollar cloud-based customer relations management company that now dominates the San Francisco skyline. They've got the tallest building west of the Mississippi.
30:48
Frederic
I think it's the second tallest, because some guy in an LA put an antenna up.
30:53
Joshua
Well the antennas don't count.
30:54
Frederic
Yeah-
30:55
Joshua
No, they cannot count.
30:56
Frederic
It does count, you can look it up. It totally counts [crosstalk 00:31:00]. Super pissed about it, and San Francisco will not let him put an antenna up. Check it.
31:03
Joshua
Then you just build it, you could build a building that was one story tall and put a [crosstalk 00:31:09] 500 story antenna on it.
31:11
Frederic
I didn't make up the news, I'm reporting the news.
31:13
Joshua
I don't know about that, but let's keep going here, we can take that offline. Okay, so fine, Parker has the second tallest building west of the Mississippi, but what's interesting about our conversation with him was not about how they built this giant building and all the multi billion dollar success that they have had, but in fact, about the very start of the company. And the fact that it wasn't necessarily the idea, but what was more important was the team that got assembled around that idea. Let's hear from Parker as he describes meeting Marc Benioff for the first time, and how some of his first impressions were not that great. You had a consulting company, Left Coast.
32:03
Parker Harris
Left Coast Software. Yeah.
32:04
Joshua
What was interesting to me about the story as I read it, was that it looked like somebody wanted to acquire Left Coast at one point.
32:14
Parker Harris
Yeah, Marc Benioff. Before, that [inaudible 00:32:19] and Saba Software. Sabbabia wanted to hire or us acquire us, and we said we're not ready for that. And that was when he introduced me to Marc Benioff. And Marc was an investor, I think he had invest maybe five million into Saba.
32:36
Joshua
He didn't take it personally that you didn't want to come work with him.
32:39
Parker Harris
No, he was a business man. He was looking to see if we would join him. When we didn't want to, he got more talent from us for a longer period of time. But the nice thing is that he was open about helping us, always, which didn't necessarily help him directly, although later it did because we gave him 50000 dollars of founders stock.
33:01
Joshua
So that worked out well.
33:04
Parker Harris
I think that worked out okay for him.
33:05
Frederic
That's a nice gesture.
33:06
Parker Harris
Yeah, well it was the right thing to do. Because he made that initial introduction.
33:12
Joshua
He made the introduction.
33:13
Parker Harris
Marc showed up, head of sales walks by, Bobby introduces Marc to the head of sales, introduces me, head of sales walks off. And Marc says, "You got to fire that guy". And I was like, whoa, this is intense. And so we went to King K's, we had lunch.
33:33
Joshua
And that was just the two of you at this point?
33:34
Parker Harris
The three of us.
33:35
Joshua
Okay.
33:37
Parker Harris
And Marc was betting Bobby on his next quarter. And they wanted me to hold the money, it was 100 bucks or whatever, and said you hold the money.
33:47
Joshua
Was Saba public at the time?
33:50
Parker Harris
No. And I said, I don't know either of you [crosstalk 00:33:54]. I'm not going to hold your money. And then in the parking lot, leaving, Marc and I walked out together and Marc pitched me on the idea.
34:01
Joshua
So he hadn't brought it up at lunch, he waited until you got out to the parking lot.
34:04
Parker Harris
Yeah. The lunch was a relationship lunch, it wasn't about the idea.
34:10
Joshua
And you had been concerned about the culture and the tension. Marc is, right off the bat saying, "Fire this guy" and betting on quarters. How did you think about-
34:23
Parker Harris
Those were the early days of the internet, so we searched for Benioff on the internet and there wasn't much. There was some article about him at a cocktail party, that was it. And Marc had us go meet with a bunch of his engineers from Oracle, including Jim Cavalleri, who had joined us and is still with us. And that was, what he told them was, it was their opportunity to check us out. But I also did the reverse and used it to ask about Marc, and I said, actually started it by saying, "Is Marc an asshole?", and I used that term to provoke a reaction as opposed to, "Is he a nice guy? Is he enjoyable to work with?", I thought I would kind of poke them a little bit.
35:12
Joshua
What reaction did you get?
35:14
Parker Harris
And I got that he's great. It was a really good group of people, they had a lot of respect for Marc. And then we kept having meetings with Marc to get to know him better.
35:25
Frederic
So just to be clear, you said it was so early in the internet days you could barely Google Benioff and find anything besides an article about a cocktail party.
35:32
Parker Harris
We got one hit.
35:33
Frederic
But were willing to say, yeah this idea of changing the way people buy all enterprise software and renting it over the internet, that sounds like a great idea. And you're like, I have an idea, yeah, this is a great idea. We should go build a software people could rent over the internet.
35:50
Parker Harris
Remember, I had been doing sales [crosstalk 00:35:50] for six years, and then early cloud as a consultant. So it was not a big leap to take the three page email that Mark had written, which was the business plan, to say yeah, I could totally see you doing that. Ironically, before that I had taken a short sabbatical and went to Nepal, went trekking and said I'd never do Sales Force automation again.
36:15
Frederic
You came back and you built it.
36:16
Parker Harris
And then later came back and changed my mind. It's funny, and this is the advice I give a lot of people, it's not the idea. It was the person. The idea was good and we had the background and it all fit, but it was Marc Benioff and it was Dave Molina before that. So when I left Metropolis and we did Left Coast Software, I also was looking at, should I go be a developer at a stable company? And I thought, no, I'm going to hook my fortunes and stay at [inaudible 00:36:45], which was a good thing. He's one of the most brilliant engineers I've ever met. And then the same thing with Marc. You meet Marc and I just knew something good is going to happen with this guy. It may not be this first thing. The first thing is pretty cool, looks like a good idea, but if that first thing doesn't happen, there will probably be new doors that will open. And so it was less about the perfect idea and more about the people.
37:17
Joshua
Sounds like Freddy, that first impressions can be deceiving. What was your first impression of Todd McKinnon, your co-founder at Okta?
37:23
Frederic
I knew of Todd by reputation and we had worked together a little bit over our time at Sales Force, but never directly and never for long periods of time. So we kind of dated for a couple of months and then I remember-
37:34
Joshua
What does that look like? Dating a potential business partner?
37:38
Frederic
We'd spend time together, going over-
37:40
Joshua
You would like go out for coffee?
37:41
Frederic
We would go out for coffee, we would meet at coffee bars.
37:44
Joshua
You'd hold hands.
37:46
Frederic
We'd meet at coffee bars and we'd go over some prototypes that he had drawn up, and some ideas about how the business would work and who the buyers would be and what these markets look like. Talk a little bit about some of the opportunity, where we'd start, how we'd focus and then go from there. So those are some of the things that we did. I remember sending him the first financial model for the company on Cinco de Mayo, May fifth, and that was the official date that we agreed that we would go into business together. He also provided a list of references, executives at Sales Force that he had worked with and who could talk a little bit about what it was like working with him. And fortunately, a good point of social proof in this case was I looked at that list and I said, "Well that's great, 'cause you can call those people and talk to them about me as well".
38:29
Joshua
So you find the right person but you obviously also have to have the right idea. So Freddy, we've now heard a bunch of different voices talk about their brilliant idea. And the truth is, that in many cases, the initial idea wasn't the end idea. And sometimes the genius idea comes along and you don't necessarily even recognize it as such. For instance, when Parker Harris met Marc Benioff, Marc had this idea for this grand business. Parker was just like, who is this guy?
39:08
Frederic
I think also that when you're getting started, it's a lot less grand and glorious than it sounds like now. And you're just trying to get something going, you're trying to build some software, you're trying to find a customer, you're trying to find an office, you're trying to raise some money and these are hard times to get rolling and it takes a lot of perseverance. And if it's easy, everyone would be doing it.
39:28
Joshua
Special thanks to our guests today, Parker Harris, Alex Asseily, Fred Luddy and Melanie Perkins for taking time out of their day to share their insights and wisdom with us. And to the Martin Trust Center for MIT entrepreneurship, for collaborating with Okta to bring this podcast to life.
39:44
Frederic
If you like what you've heard and want to know more, check out exclusive, in-depth stories from each episode at 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.
40:01
Joshua
I'm Joshua Davis.
40:02
Frederic
And I'm Frederic Kerrest, and we hope you'll turn in for our next episode, Garage Days.
40:07
Joshua
Garage Days.
40:08
Frederic
Thanks for listening.
40:09
Joshua
Nobody should ever want or desire to be living in a garage.
The company I was working for went bankrupt. And so, I was unemployed and I'm also a little but anomalous and that I was unemployed and 49 years old. And I thought, "Well, I worked for enough people." I had to see if I'm as smart as I think I am.
Fred Luddy