10 Tough Lessons We Learned Building a Prenicorn Outside of Silicon Valley from Pendo.io (Video + Transcript)

Building a hyper-growth company is hard anywhere, but building one outside the Bay Area comes with its own unique challenges. Learn how Pendo built a product, team, and culture in its Raleigh hometown that could scale coast-to-coast and continent-to-continent.

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Todd Olson – CEO @ Pendo.io

Good afternoon. Welcome. It’s great to be here with all of you. Pendo, my company is headquartered Raleigh, North Carolina. Thank you. Thank you. Can I see a show of hands for those of you that have headquarters outside of the Bay Area, a secondary market? Okay, not surprised. A lot of you.

Look, starting companies is really, really hard. Starting companies outside the Bay area is even harder. One, I love the fact that everyone’s trying. That’s really, really positive, but access to capital, access to talent, there’s simply less of it outside of the Bay Area. You can read blog posts, tweets about why you shouldn’t try to create a company outside the Bay area.

A number of VCs, prominent people, smart people will tell you not to even try, to kind of give up and just join what’s going on out here, but it’s possible and there’s plenty of success stories. My goal today is to share a few lessons that we’ve learned and how we’ve gotten to this point headquartered in Raleigh, North Carolina.

We started the company when we were just five people on a co-working space. We actually put an address in San Francisco thinking, “Look, we want to be taken seriously. Let’s put a San Francisco address on it.” We had this on our website for six months and variably every once in a while someone would email me and say, “Hey, I’ll be in SoMa tomorrow. Can we meet?” Mind you, that’s about a six hour flight. I have no reason otherwise to go to San Francisco to meet this person and I honestly never went to this space.

It was a friend of a friend’s address and it was interesting that early on we felt they wouldn’t be taken seriously unless we actually put a San Francisco address on our website. After about six months of this, I got really frustrated and angry and is like, “Look, we are not being authentic. We are not embracing who we are.” So, as part of a rebrand and a relaunch of our website, we actually started to finally embrace the fact that we were made in North Carolina. We actually have a North Carolina map on our website, we have a little heart in it, and ever since that point we really embraced who we are.

We’ve tried to now think of it as how do we take what’s unique and differentiating about our region and make it a positive. So, one of the aspects of our area is Southern hospitality. Treating customers really, really well. Going above and beyond, being thoughtful and we try to say, how do we infuse Southern hospitality into our brand and make that a differentiator rather than being stressed about the fact that there are some negatives of being where we are.

Again, we felt that there was much greater value in being authentic than trying to be someone that we weren’t and try to find positives. Wherever you live, wherever you’re from, there’s something really unique about that area. I’d encourage you to think about what’s unique, think about what’s differentiated, and use that as a positive.

Also, part of that is being intentional about who you want to be as a company. I think this is one of the great things about being in SaaS and all of you at our SaaS conference is that you can address the entire world. The world’s your market, right? When we benchmarked ourself, when we started this company, we didn’t say we wanted to be the biggest company in Raleigh. We didn’t say we want to be the biggest company in North Carolina. We wanted to create a category leader.

We wanted to be one of the biggest companies in the world and we’ve always held ourselves to the bar of what are the top 1% companies in the world doing? How fast re they growing? How are they behaving? We’ve always thought of ourself as that’s our comparative set, not our local region. That’s helped us make sure we don’t get too caught up in the fact of how we’re doing in relation to other folks in our community. It always made sure we kept a really, really high bar.

I’d encourage you to think and be intentional of what kind of company do you want to create. Who do you want to be? Who do you want to compare yourself to? Look at four, five years, what company do you want to be? The good news is, you’re at a conference where there are a lot of amazing examples, amazing companies. We first went to SaaStr three years ago when we picked a few examples of companies that we want to model ourselves after and that became the bar, that became the goal.

The second thing which is fairly obvious … Look, you guys passed this test. Be willing to travel. I’ll never forget about a quarter into selling customers for the first time, we had this deal that was just stalled. It was in Utah, it wasn’t moving. I kept trying to schedule a phone call, trying to schedule a phone call and it was getting really, really frustrating. Finally, I give up and said, “Look, I’m going to be in Salt Lake City tomorrow. Can we meet in person?” The person said, “Sure. I can curve out half an hour time.”

I immediately left the office, went home, packed a bag, went the airport, booked flights, showed up there at mid night, met with the individual. We ended up signing that contract in the uber back to the airport on the way home. It was our largest contract to date, kind of helps the other quarter. It was the last day of the quarter as well. If I was not willing to just put myself out there get on a plane, we would never close that deal. I think I did this time and time again. I spend a lot of time going to events.

One of the great benefits of some of the investors that we’ve raised from is that we get invited to a lot of great networking events here. It’s a positive thing. I’ve always gotten a lot of value out of hearing tips and advice and stories from other founders that have been successful that are a few years a head of us. I make time for it and that even means getting up, taking early morning flight and heading home on a red eye to do a day trip to the Bay area, I’ll do it. I think it’s that willingness to travel that continues keeping us a head of the curve, continues teaching us how to continue building a great business.

Our series A, when we actually closed that, a lot of people hadn’t heard of us. Again, we’re this small company in North Carolina. We ended up getting introduce to Battery Ventures via a customer. We weren’t raising money, we weren’t trying raising money. Honestly, we were just focused on taking care of customers. Building a great product, taking care of customers and through the process of taking care of customers, customers introduce us to investors as someone interesting, someone to look at. Had that meeting, did not have a deck, honestly, no sophisticated pitch.

I don’t think I was even that coherent in the description of the company, but I talked about customers and I talked about what we were doing for customers and the results those customers were seeing and Battery followed up. They talked to all the customers, they did reference calls and turns out they said really, really good things about us and lo and behold it led to our series A. A lot of people talk about, oh, I’m fundraising right now, I’ve got to get the right pitch, and I’ve got to build my list of folks. Sometimes you just need to focus on getting really amazing customers saying great things about you.

There’s no replacement for what customers can do for your business. It’s never a waste of time to find a great customer and take care of them and that’s led to frankly a lot of our success to date. Two years ago at SaaStr, I was huddled up in a room trying to close on a chief product officer. I’d met an individual, he actually bought our product, we really hit it off. He was a VP of product at a series D startup, so a little bit ahead of us and we just had a real connection. Real connection, but there was a catch. The catch was he had just moved his family four kids to New York city.

We had no New York city presence. Our entire company is in Raleigh, our entire development team is in Raleigh, entire product management team is there, I’m there. This was a problem. I had my CTO and everyone would be like, “You can’t do this. This is never going to work.” But I knew he was the right person. I had a good sense. We had an alignment of vision, we really jelled together and I want to work with him. So, we decided to be flexible and through that we actually opened a New York office. We hired him and my thesis always was, if you find the right person, be flexible and the right person will make it work.

Sure enough, he’s traveled when he’s had to travel, he has been there and lo and behold, fast forward to today, he recently is under contract of for a house in Raleigh. He actually is moving. So, it ended up working out very, very well for everyone in the long run, but I think if I wasn’t flexible, I wouldn’t be here today having that. That goes for other talent as well. Our Chief Revenue officer, another one of our senior leadership lives in Scottsdale, Arizona.

Still to this day, I’ve not been to Scottsdale, Arizona and it has not been an impact on the business at all. Honestly, folks that work at our company, I doubt most people actually know where he lives and that’s okay. He makes it work. A lot of us as entrepreneurs, certainly early stage entrepreneurs, we get this idea that this person must be here, they must … I’d encourage you, if the person’s right, just figure a way to get it done.

A lot of what you see on TV about the Silicon Valley culture, and we mean the good things, not the bad things, can easily be replicated. You can buy a sit-stand desk, you can have an open PTO policy, you can have kombucha in your office, they make it all over the country. You can have beer, you can have a transparent culture. All these things are actually pretty easy to replicate. It’s pretty common practice for someone from the Bay area to walk into our offices and says, “Oh, it feels like we’re in Silicon Valley.” We somehow did something magical by buying similar furniture and having similar packs, but the good news is, in our geography, we’re actually are pretty unique.

It’s actually is differentiated, what we do. It’s actually a positive for us. It’s not just what every one else does all around you. There’s a lot of goodness to some of the less traditional things about a Silicon Valley culture and we’ve embraced it. We constantly look at our packs, and our benefits and make sure we stay competitive with best and class companies doing out here. Ultimately, having best and class benefits attracts best and class people and our business is a people business. You want the best people at your company. So, this is something that’s very easy to replicate. It’s honestly a no brainer. I would just do it. It works for a reason, so it’s something very easy to bring into your culture.

Look, we’re a diamond sponsor here if you didn’t notice. You see a lot of pink around. You have to take every advantage to build awareness. Given that we don’t live here, there is no word of mouth. We do now have an office here, but that’s very, very recent. We have to go above and beyond to build awareness. Above and beyond to build brand. We actually did an out of home campaign which is a billboard campaign, bus terminals. If you had told me three years ago that we’d have billboards out here, I would have thought you’re crazy. As you all know, it’s very difficult to measure our ROI. Reality is, we have to think differently.

We don’t have the benefit of being here. In order to be present on people’s minds and be seen as a leader, we have to build our presence and part of building our presence is spending money to build our brand image. The diamond sponsorship here, out of home campaigns, like I said, traveling and being willing to attend events. I was just talking to someone that knows me in the community and says, “Wow, you go to a lot of events.” Well, yeah, I go to a lot of events. I want to learn. I can’t walk down the street and talk to a Unicorn CEO that just happens to be walking around downtown Raleigh and grabbing coffee. If I want to meet this people, I have to go to them, I have to come here.

We take every advantage of any opportunity for us to get in front of people. To share the Pendo story, to build a relationship, build a connection. This is really, really important part of being outside the area. It’s like a tax in living outside the area, but you have to be creative, you have to be bold. We’ve done a lot of interesting things, but the other thing that I think we’ve done very successfully is not just focusing on the Bay area as a geography.

Believe it or not, people live all over the world and country. So, we’ve actually done a lot of local events in Vancouver and St. Louis, and of course Austin, and Boston. We actually have a really good brand presence and reputation and customer sense in all of these cities. I think we have an advantage of being outside the area that we’ve built. We’ve taken advantage of this and built quite a bit of awareness all over the United States.

We’ve raised just for context about 100 million dollars and I think by most measures they’ve been good valuations, competitive deals. I thought we did a good job, but last week, I’m in the Bay area. I’m sharing a ride with one of our investors and he starts sharing with me this number that 100 x multiple. It’s pretty easy to feel like a failure once in a while when you walk around here and people talking about multiples and post monies and all these things.

I have to remind myself that one, every business is different. Every market is a little bit different, every deal is a little bit different and honestly, the multiple and the post money and a lot of the metrics they talk around out here aren’t necessary the metrics that matter. You have to constantly remind yourself revenue, revenue growth, retention, net promoter score, eNPS or Employee Net Promoter Score. These are the numbers that really matter.

If you have happy customers, if you’re growing, if you have good net retention where your core revenue base is organically growing. If you have NPS, which is good word of mouth and references, if you have really happy employees that love coming to work and take care of customers, those are the numbers that ultimately matter. That’s what you should be focusing on, focusing on your posts. Yes, there are financial consequences these numbers, but they’re not really what matters. Honestly if you focus on the other metrics, you’ll get the multiples, you’ll get the funding. Honestly, you’ll get what you want in terms of hitting those next mile stones. I think it’s always critical to focus on what’s core to your business.

Building a business is a team sport and part of your team sport is your investors, is your board syndicate. I would encourage you to get the best possible investors. When I say investors, I mean people, I mean humans. Our two rounds, our Series A and Series C where we had single time sheets. We did not shop it, we did not get competitive offers, and that frankly is not the advice you’ll hear from a lot of a lot entrepreneurs. If you’re going to a talk on fund raising they’ll say, talk to as many people, make it competitive. The more competitive a deal, the better deal is going …

That’s conventional wisdom and that’s what you’ll hear, but I would argue that you should pace it by and start getting the best possible people involved in your company because people are ultimately what’s going to affect your day to day. Trust me, there are some situations that can cause serious pain for you in terms of how often they call you and what questions they ask. This really, really matters. I would encourage you to think about the person even if it means you take a slightly worse deal to get the right people around the table.

Again, our Series A, Battery was … We liked the people, we did the deal. Our Series C, Meritech, I’d known Rob Ward for five plus years. There’s a lot of value in that relationship. So, we brought them on board for that reason. Honestly, in all of our other rounds, we did an extensive number of personal references on the individual. In our Series D, we did about 15 references on evaluating our investors to make sure not just the firm, but the individuals of the firm are the people we want to partner up with.

I got good advice early on that raising money is a lot like getting married. It’s just a lot harder to get divorced, in many cases, nearly impossible.This is a really long-term commitment and I want to encourage you to understand the people, understand what you’re getting involved with.

In Reid Hoffman’s book, The Alliance, he talks a lot about getting intelligence and building a network through your employee base of how you understand what’s going in the market. This is really, really critical. It’s especially critical in the Bay area. By not being here, you just don’t have access to insider information of things going on. For example, I referenced hiring a Chief Revenue Officer, Bill. Honestly, i had no idea he was looking for a job, no idea that he was on the market, but it was through meeting with a network, again, investors, other folks in the industry. We found out about it and got connected.

So, I would encourage you just to … When you’re traveling, when you’re meeting with people, invest in getting coffee, getting intelligence. Everything from whether your competitors are raising capital, whether folks are looking at an acquisition. We’ve been really fortunate by building relationships out here that we get a lot of early warnings when these things happen. The early warnings are useful because well, you probably can’t change the outcome and you probably won’t change the outcome, you can better prepare for it. You can prepare communication, you can prepare what your potential response is going to be.

Honestly, I’d rather know something is going to happen good or bad in advance, so I can at least prepare for it. By knowing, it’s put us in a very strong position for being thoughtful about our business and not being reactionary. This is something that’s not that hard to do, but encourage all of your employees when they’re traveling or they’re meeting with folks, just ask them what they’re hearing in the grapevine. What’s going on? What do you hear about us? What are our customers doing? And use that network to build an intelligence network and share it across your company.

You have a channel on Slack or whatever tool you use to share this sort of information. It’s incredibly valuable keeping your fingers on the pulse of what’s going on. Again, because you’re not here, you have to over invest in these sorts of systems. Well, the good news is, it gets easier the bigger you get. The interesting thing now is when I talk to a number of CEOs, even head quartered out here, they’re asking me about, “Hey, we’re looking at setting up a second office outside the Bay area. Can I talk to you about Raleigh?” Or I hear people looking at Arizona or Austin or Nashville.

But now, as people start getting to the Series C, Series D range, start to think a little more about efficiencies and frankly, started looking at your company and thinking, if I’m really going to scale this, I’m going to hire lots of people. Competing against the Google’s and the Facebook’s just, one, it’s really very expensive. But two, it’s very, very difficult to access the best possible talent. So, you eventually get a certain stage where the fact that you’re outside the Bay area is seen as an advantage.

I’ve talked to several late stage and growth investors that actually like investing outside the Bay area more so than inside. We are seeing a little bit of a C change in terms of trends here, but I think it absolutely … From my perspective, it feels very, very different today than it did before. Honestly, once you get to a certain size, people are willing to travel to see you.

When you’re small, know you’re probably going to have to see them, but when you get bigger, people will get on a plane for a company that’s of a certain scale. We’re finally in that position where people are going to get in some planes to visit us. There is hope if you’re in a place where it feels there isn’t. As soon as you hit a certain scale, it gets a whole heck of a lot easier.

I’m in the 11th point that I have and that is, if you are in a small market and you start seeing success, one thing you need to think about is what sort of impact do you want to have on your community? One of the things about being in a smaller market is, as you achieve success, you start becoming a big fish in a small pond. I know that’s often seen as a negative comment, being a big fish in a small pond, but it’s the reality of the situation. When you’re a big fish in a small pond, there’s no one else around you, behind you, helping you grow the pond. If you aren’t growing it, no one is growing it.

So, I personally devote about 10%, maybe 15% of my time to mentoring young entrepreneurs, volunteering my time in co-working spaces, spending time at local universities. We host a lot of meet ups in the community. And it’s not just me, it’s our entire leadership team and executive team. Invest in your community because ultimately, your success could be constrained by the overall success in your community, your community’s ability to recruit people, your community’s ability to create a quality of life. If you don’t invest in it, there isn’t anyone else doing it for you. There’s no one else to draft off of.

When you think about building your business, you’re also not just building a company, but for some of us who are in smaller regions, you’re building a community. It’s something to be cognizant of and something that become more aware to us as we’ve gotten to our scales. Thanks for being here. Appreciate seeing everyone and enjoy the rest of the show. Thanks.

 

Published on April 16, 2019

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