Category Archives: Venture Capital

SaaS Product Power Breakfast with Evan Kaplan of Influx Data

Please join us for tomorrow’s SaaS Product Power Breakfast, Thursday 6/24 at 8am Pacific.  Our guest is veteran technology executive Evan Kaplan, CEO of Influx Data, makers of the open-source, time-series database InfluxDB.

Our theme for tomorrow’s episode is how to manage the transition from traditional open source to true cloud native, something relatively few companies have done, and a transition that Evan has overseen at Influx Data.

We’ll cover questions including:

  • A primer on the traditional open source model
  • What it means to be true cloud native
  • How to approach the transition to true cloud native
  • Perils and pitfalls in the transition
  • Organizational (and people) change in the transition
  • Licensing implications, including protecting the open source from cloud hyperscalers and while trying not to alienate the traditional open source community

Influx Data is a category leader that has raised about $120M from top-tier investors.  Evan has a spectacular background, having been founder/CEO of Aventail for about a decade, CEO of iPass for half a decade, the member of numerous boards, and having serving 5+ years at Influx Data.  I’m super excited to have him on the show.  See you there!

Product Power Breakfast with Chris McLaughlin on Big/Small, US/Euro, and Marketing/Product

This week’s episode of the SaaS Product Power Breakfast is Thursday, June 10th, at 8am Pacific and we welcome a special friend and unique guest, Chris McLaughlin, currently CMO at France-based powerhouse LumApps, a collaboration and communications platform backed by top European investors including Idinvest and Goldman Sachs.

I got to know Chris by working together in his prior gig as joint CMO and CPO at Nuxeo, a France-based content services platform that had a great exit earlier this year to Thoma Bravo / Hyland Software, and where I sat on the board of directors for the past 4 years.

Chris has a unique background because of its dualities, working:

  • As a senior executive for both US-based and European-based companies.
  • At both growth startups and large megavendors (e.g., EMC/Documentum, IBM/FileNet)
  • In leadership roles on both the Product and the Marketing side.

In this week’s episode we — and the audience — will ask Chris many questions, including:

  • How to get product and marketing working together, especially when they aren’t under a common boss.
  • How European startups should organize their go-to-market functions to enter and grow in the US market
  • The role of both the product and marketing leaders in startups with either a technical founder or business founder
  • When is the right time to hire your first CPO and/or CMO
  • How to align product, marketing, and sales around a strategy — and dealing with the normal challenges in focusing that strategy

See you there, Thursday 6/10 at 8 am Pacific — and bring a friend.

As always, the room will be recorded and posted.  We think of the show as a podcast recorded in front of a live, studio audience.

How To Be A Good Independent Board Member

I’m writing this from both the perspective of a former CEO (who would occasionally get sideways with his board) and that of a six-time independent board member.  I’ll look first from the CEO perspective, examining what I wanted in an independent board member (aka non-executive director), and second from the board director perspective [1].

The CEO Perspective:  What I Wanted in an Independent Director

As a CEO, I wanted:

  • An advisor.  Someone I could use as a sounding board for ideas and decisions.  As CEO, you have no peer group within the company [2], so it’s valuable to have someone who knows the company, is current on industry best practices [3], but who feels less boss-like than the VCs/investors on the board.
  • An expert.  Someone the board would look to for opinions.  This is important — when the board is leaning left and the CEO wants to go right, an expert who has been-there, done-that and whose opinion is respected by the board can be quite influential.
  • A supporter.  Someone who would have my back both in board meetings and, more importantly, if and when board members get together outside board meetings to discuss the company [4].  When things go sideways, this can be the difference between a reconciliatory conversation and a replacement CEO search [5].  Remember Sequoia founder Don Valentine’s famous quote:  “I am 100% behind my CEOs right up until the day I fire them.”
  • A diplomat.  Someone who, when times are tense, can work as an intermediary between the differing parties, often but certainly not always, the investors on one side and founders/management on the other. Former sales leaders often perform well in this situation [6].
  • A coach.  Someone who can help make the game plan for getting something done (e.g., decomposing and sequencing) while providing a pep talk or a kick in the butt, as indicated, along the way of doing it.

I think (and I’m obviously biased here) that current/former GMs and CEOs make better advisors than current/former functional heads [7] because they have wrestled with more of the issues that CEOs face.  The hardest part of the CEO job (for me at least), and the part for which climbing the corporate ladder leaves you most unprepared, is working for a board, not a boss [8].

I should add that ensuring proper corporate governance is an important duty for for the board, but while critical, I view it as table stakes and have thus excluded governance-related items from the list of differentiating attributes above.

The Board Member Perspective:  What I Think Makes a Good Independent Director

From my position on several boards, I think a good independent director is:

  • Someone who acts as an advisor, not a consultant.  People sometimes confuse the two.  Advisors respond and consultants create.  Advisors provide feedback on your ideas, plans, and deliverables.  Consultants play a role in making them.  Put differently, advisors can show up to a discussion without doing any homework; consultants do the homework to create the materials for the discussion.
  • Someone who builds a 1-1 relationship with the CEO and delivers the vast majority of their value-add through that relationship [9].  Board meetings are great, but they typically involve a large group of people and are part performance art and part working group.  Important decisions do get made in board meetings, but a lot of education, detail-driving, consensus-building, and other value-add happens outside.
  • Someone who brings ideas and best practices.  It’s easy to get myopic when you’re building a company; there is so much to do inside, it’s easy to forget to look outside.  Good independent directors stay current on best practices (e.g., systems, methodologies, tools) and bring them to the CEO and the company.  See my current Gong evangelization as an example.
  • Someone who’ll have hard conversations.  Nobody likes being told things that they don’t want to hear, but somebody needs to do it.  The good independent director tells the CEO when their go-to-market analysis is weak, their hiring plan is completely unrealistic, or they should pay more attention to a competitor who’s intent on eating their lunch.  These contrapuntal conversations aren’t always pleasant, but they can add a lot of value.
  • Someone who challenges the CEO on strategy and executive team hiring and composition.  These are absolutely key CEO duties.  Too often strategies lack focus, and executive recruiting processes lack discipline.   Executive team composition, at a high-growth company, is a constant struggle [9A].  Someone needs to say things like, “you’re trying to be everything to everybody,” “the three CFO finalists have completely different profiles,” or “why is every e-staff member in the biggest job they’ve ever hard?”  We need a focused strategy that we can execute.  We need finalists to fit an agreed-to profile [10].  We need a team that balances up-and-comers with veterans.
  • Someone who inspects the troops.  Call me old school, but I think an important part of every (post-quarter) board meeting is a brief operational review where each functional heads presents the status of their department.  While experience has taught me that this is a better way to discover bad apples than identify good ones [11], I nevertheless believe it’s an important part of a meeting.  As a former operating executive, the independent director should take the lead in this inspection.
  • Someone who pushes for standard metrics and templates.  This is not primarily because I like metrics, but because it is human nature to cherry-pick metrics and the only way I know to prevent such cherry-picking is to design standard, holistic templates and use them at every meeting.  That eliminates any possibility of only talking about the good metrics and omitting the bad ones.  If the board doesn’t know about a problem, they can’t help solve it.  Standard templates ensure they know.

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Notes

[1] Knowing full well that the CEOs you’re supporting should be the final judge of that.

[2] Which why it’s a nice idea to get one outside the company via one of many CEO groups

[3] Some operating execs let themselves get pretty rusty in this regard.  Having worked with highly pedigreed but anachronistic advisors, I work hard to stay current in operating models and topics.

[4] This might be a closed-closed session after the usual board/CEO closed session, or it might be separate formal or ad hoc meetings where non-executive board members and investors have discussions.

[5] Founders typically worry about the latter less, but hired CEOs do and probably should worry about it more.

[6] Who later go into GM or CEO jobs to best pass all my tests.

[7] With the exception of CFOs for audit committees and such.

[8] This is particularly true on venture-backed startup boards where there is comparatively more “cat herding” than on PE boards which, while they have their own challenges, are usually more clear and singular in what they want.

[9] It should always include the CEO.  It might also include relationships with the CRO, CFO, CMO or other advisor-relevant functional head.

[9A] The fundamental tension between the cliché conflict between:  “dance with who brung ya” and “the people that got us to this level aren’t [necessarily] the ones to take us to the next.”  (See slides 11 to 16 of this presentation.)  [Necessarily] added because some people seem to think that getting the company to Level X is actually a liability in the climb to Level X+1.

[10] Deciding whether you want a CFO from an accounting/controller background or a finance/FP&A background should be decided long before you have a list of finalists.

[11] If someone is bad at presenting their department, they are typically bad at running it.  However, the converse is not true:  if someone is good presenting their department they may or may not be good at running it.  Some execs “give good meeting” such that they paint a rosy picture of a broken function.

Private Equity Funcast: A Board Perspective on Peopleops

I’m back for my second appearance on the ParkerGale Private Equity Funcast, this time speaking with Jimmy Holloran on topics related to Peopleops and the Chief People Officer (CPO) in a session entitled A Board Perspective on Peopleops.

Topic we cover include:

  • The role of HR and my mantra:  help managers manage
  • What help means and taking pride in a supporting role
  • Help who?  (Managers or employees)
  • Hiring and recruiting
  • Conflict aversion
  • The three golden rules of feedback
  • 9-box models
  • Giving a successful People update at board meetings
  • Scorecards and the infamous “it’s all green” story
  • How to tell if the CPO is helping (hint: ask)

The episode is available on the ParkerGale site, Apple Podcasts, and Spotify.  For those interested, my first appearance — a romp that contrasts the PE and VC worlds with my old friend Jim Milbery — is available here.

Appearance on the Metrics That Measure Up Podcast

“Measure or measure not.  There is no try.”

— My response to being called the Yoda of SaaS metrics.

Just a quick post to highlight my recent appearance on the Metrics That Measure Up podcast, hosted by Ray Rike, founder and CEO of RevOps^2, a firm focused on SaaS metrics and benchmarking.

Ray’s a great guy, passionate about metrics, unafraid of diving into the details, and the producer of a great metrics-focused podcast that has featured many quality guests including Bryon Deeter, Tom Reilly, David Appel, Elay Cohen, Mark Petruzzi / Paul Melchiorre, Sally Duby, Amy Volas, and M.R. Rangaswami.

In the episode, Ray and I discuss:

  • Top SaaS metrics — e.g., annual recurring revenue (ARR), ARR growth, net dollar retention (NDR), net promoter score (NPS), employee NPS, and customer acquisition cost (CAC) ratio
  • How metrics vary with scale
  • Avoiding survivor bias, both in calculating churn rates and in comparisons to public comparison benchmarks (comps) [1]
  • How different metrics impact the enterprise value to revenue (EV/R) multiple — and a quick place to examine those correlations (i.e., the Meritech comps microsite).
  • Win rates and milestone vs. cohort analysis
  • Segmenting metrics, such as CAC and LTV/CAC, and looking at sales CAC vs. marketing CAC.
  • Blind adherence to metrics and benchmarks
  • Consumption-based pricing (aka, usage-based pricing)
  • Career advice for would-be founders

If you enjoy this episode I’m sure you’ll enjoy Ray’s whole podcast, which you can find here.

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Notes

[1] Perhaps more availability bias (or, as Ray calls it, selection bias) than survivor bias, but either way, a bias to understand.