An Interview with One of Salesforce’s Founding Board Members (Video + Transcript)

Mallun Yen, COO at SaaStr interviews Magdalena Yesil, one of the pioneers in the SaaS industry. She’s the first investor and founding board member of Salesforce, author of Power Up, and founder of Broadway Angels & DriveInformed to name a few. You may also know her from her previous startups like CyberCash.

In this session, Magdalena talks about:

  • Her upbringing from Turkey to Silicon Valley
  • The early days at Salesforce (+ how she created the annual subscription model)
  • Her experience as a woman-VC and advice for men and women in tech on mentoring the opposite sex
  • Her new book (which is a great read, by the way!)

Also, don’t miss out on discounted prices for SaaStr Annual 2019 tickets.

 

Transcript

Mallun Yen: Good afternoon. Thanks for coming here after lunch. Magdalena I’m so excited to be able to talk to you today. First of all I want to congratulate you on your new book Power up. We’re going to talk about that in a moment but first I want to recognize some of your truly amazing contributions. You’re a technology pioneer and really one of the founding leaders of Silicon Valley. Three of the companies that Magdalena co-founded were the first to commercialize Internet access, e-commerce infrastructure, and also electronic payments. Three pretty key technology areas I would say. You became a partner with U.S. venture partners and you co-founded one of the first women investing groups Broadway Angels. You’re now a board member of Zora, Smartsheet and of course RPX, a company that we share a board seat on. And as mentioned you’re working on your fourth startup DriveInformed with one of your two sons. So you’ve found time to have kids along the way too. So last year at SaaStr of many of you who were here may remember the executive order limiting immigration was signed and SaaStr was one of the first companies that signed on to join an amicus brief against the travel ban. Now as you’ve heard from this morning diversity and immigrants are a really important part of SaaStr as well as the tech community overall. So you Magdalena are an immigrant and in many ways you’re the epitome of a Silicon Valley immigrant success story. So at the age of 17 Magdalena flies by herself from Istanbul to South Side Chicago with two suitcases and forty three dollars. So how do you make your way to the Silicon Valley and decide to start three companies along the way.

Magdalena Yesil: So I come from Istanbul to Illinois Institute of Technology and Southside Chicago and then the way I make my way to California is that it turns October. And it starts snowing.

Magdalena Yesil: And I am coming from Istanbul and I’ve got a leather coat and leather boots. And my roommate says “When is your mom going to ship you your winter clothes?” And I say these are my winter clothes and she says you’ll never make it. You’ll die. Anyway, the only other people who are complaining about the cold in Chicago were from California. Turns out and I said it must be warm in California because obviously you guys are complaining as well. Anyway I asked if there were good schools in California. Turns out they were from Northern California. They recommended Berkeley and Stanford to me. I applied to both and I ended up at Stanford. So that’s how I made my way to California. And then I was premed. I was studying at Stanford taking vertebrate biology. I got 94/100 and I got a C plus on that test. I went to my professor and said Sir you made a mistake. I got ninety four and you gave me a C plus and he says no you’re the one who made the mistakes. In fact I grade on a curve and I was incredibly disheartened and I thought I’ll never make it because I’m such a good student.

Magdalena Yesil: That day just coincidentally I sat next to a man who I asked me how I was and I didn’t realize that when Americans say how are you. How are you doing. They don’t really expect an answer. So I gave him my long answer. I said I was doing very poorly because of the situation right I’d gotten. I thought a pretty good test result. He said to me you should become an engineer in engineering. We collaborate. We work together we do problem sets together. It’s not like premed we’re not that competitive. So next chapter I switch to engineering. I get a undergraduate degree in industrial engineering and it turns out I can’t get a summer job my junior year. And I go to my advisor and say “What’s wrong. All my friends have summer jobs I can’t. No one is offering me a job.” He says “Well. You’re an immigrant you don’t have a work permit. Of course no one’s offering you a job.” And again I say “Am I doomed for life will I never get a job in America? And he says no. Get a master’s in electrical engineering and you’ll have all kinds of companies actually sponsoring you for green card.” So I got a masters in electrical engineering and I don’t realize Silicon Valley is next door.

Magdalena Yesil: And really that’s the rest is history. I graduate I become an employee of semiconductor design engineer and I have about a decade of of working for corporations. Very late 80s early 90s. I find myself in a situation where I have two kids and I’m out of a job. And turns out my husband is also out of a job. And when people say to me “Well how did you aspire to be an entrepreneur?” I say “I never aspired to be an entrepreneur. I became an entrepreneur because I couldn’t find a job.” And literally I’m interviewing and it turns out I’d had a consulting stint. So I’d been out of the operating world. I was on the consulting side and I was having a very tough time getting a job offer. So I become an entrepreneur. I have to create a job for myself. And the only thing I could think of is figure out an area where you can be an expert. You can know more than the next person sitting next to you. And it was the Internet space that I decided to focus on because internet access was still in the domain of universities and nonprofits and military. And I truly believed in my heart having used the Internet all through my Stanford years that sooner or later was going to get commercialized. And that’s how I started an Internet access company.

Mallun Yen: And so that was the first of three companies that you started?

Magdalena Yesil: That was the first one internet access did become commercial Youyounet went public in 1994. I’m not one of the founders. And I actually founded another company with my co-founder Dan Lynch and we merged ourselves into a Youyounet. And after Youyounet went public we left and started a second company Cybercash. We were the very first e-commerce payments company. So very early days I’m talking about Amazon having revenues of less than five million dollars when they were just a bookseller and we were providing payment solutions so that consumers could use their credit cards and pay merchants and merchants could accept credit cards online. Believe it or not it was revolutionary at the time.

Mallun Yen: So somewhere along this well along the way view met Marc Benioff correct. And I actually met him at Cybercash and so Magdalena as the first investor and the first board member of Salesforce and Salesforce especially in this community is held up obviously as an enormous success story but in the early days I mean this was these were even the days before Parker Harris In fact I think you put Marc and Parker together. It wasn’t so easy. So tell us about. Tell us about the early days.

Magdalena Yesil: So the way I met Marc is that when I was at Cybercash we were doing we were creating strategic partnerships with various companies. Eric Schmidt, I was working with at Sun and I was working with Marc Benioff at Oracle and after I left Cybercash and did my third company Marc and I continued to work together. Actually the third company got acquired but Marc had wanted to be an investor and we made a few investments together. And one day Marc called me and said “Listen, I need to have lunch with you because I have an idea I need to bounce off of you.” And the idea was taking a Siebel. Solutions. Boiling it down to the 20 percent or 10 percent of the functionality that most people used leave the other 90 percent behind and turn that product into a you know software as a service model. We didn’t use the word software as a service at the time. We didn’t have the word cloud. It was a very basic idea. We did have a space for those of you who remember that. So it wasn’t completely out of the box idea but it was out of the box in the sense that we really had a multi tenant environment that we were going to basically be hosting the software in a multi tenant environment. So when Mark and I had lunch that day I already believe that the end the end of enterprise software was coming as we knew it it was too expensive middle midsize and small companies couldn’t really afford it at all.

Magdalena Yesil: And even the large ones who could afford it had such a tough time with the implementation. They spend millions of dollars on the license and then another million or two on the implementation side I truly believe that those days were going to be over remind us what year this was. OK so this is 1998. This is late 1998 and we incorporated shortly after I think right out there right at the beginning of 99. Remember it was the dot com boom. So now as soon as we wrote the software and we pushed it out there we had a ton of dot coms who turned out to be our customers and they were paying for it. We were completely under the radar. So the idea was never be noticed by a CIO because what you really want is the employees the salespeople to be using those paying with their own credit card. And we had great success. A lot of the dot coms adopted us. We were doing very well. And then something happened. You know that amount com bust happened and our customers started running out of cash and going out of business. So now I’m talking 2001. We are burning somewhere around million to a million and a half a month. And I go back to the venture firm at the time I’m a venture capitalist to the venture firm U.S. venture partners where I’m working and I say to my partners “Listen, I’m gonna bring this company and you already know it. You’ve already heard from me and it’s a great opportunity to invest because the company really needs cash.” Turns out we present and I get turned down and not only do I get turned down by my firm U.S. V.P. but we get turned down by pretty much every venture capitalist we go.

Mallun Yen: And what were they telling you when they turned you down?

Magdalena Yesil: Well first of all we were called Salesforce dot com and they were saying Haven’t you guys heard there was a dot com bust. Why don’t you get that dot com out of your name. Like what kind of puts but do you have.

Magdalena Yesil: And then the second thing they were saying is like the idea of having customers give you their customer data their sales data outside their firewall. That’s crazy like. Like. Change your model put it inside the firewall allow for that. And that was our religion the religion said no we will not do that because I would go against everything that we had built. So 2001 fall when we couldn’t raise money we almost didn’t make payroll. It was we were at the brink of bankruptcy.

Mallun Yen: How many how employees were you at the time?

Magdalena Yesil: How many employees? I can’t remember but enough that you’re worried about it. You can just go into your back pocket and pull out the cash. So the bottom line is I it was very tough on me because I really I knew Mark relied on me to raise capital because I was a venture capitalist and I spent many many sleepless nights full of anxiety trying to figure out where will we get the cash from. And then I had the aha moment of hey we don’t have these seeds loving us but we have customers that love us and the customers currently pay on a monthly basis. We again part of the religion was no contract. Right. It was very free to the customer.

Magdalena Yesil: They just use whatever they want they can always terminate. But my my aha moment was what if we. Ask the customer to actually pay upfront for a discount a one year maybe even a three year term then we will be able to solve our cash flow problem by getting the cash upfront.

Mallun Yen: And so what was Mark’s reaction to that?

Magdalena Yesil: He was like “No way. Are you kidding?” Like that I’ve been preaching against contracts and now you’re telling me to put in place contracts that I’ve been saying no contracts no software. The good news was that just as I was thinking this some of our sales people who were very aware of the fact that you know we were in this cash crunch had bounced the idea off of a couple of customers. So the bottom line is we did implement the you know Mark did finally come around. We did implement the one year payment upfront which of course now is you know the industry uses this all the time. But at the time it was very revolutionary. And ultimately our customers ended up saving us. And you know it took us less than six months to turn around and we became cash flow positive.

Mallun Yen: Didn’t the dot com bust ultimately actually help your business.

Magdalena Yesil: Very much so. Yes absolutely. The dot com bust. What it did was it enabled the small players like us who had a new business model to get large corporations to actually come in you know become our customers because the CIO budgets started shrinking after the dot com bust the idea of paying multimillion dollar check to a software company was not that palatable when the when the industry went down. So if we had the functionality that most people used why wouldn’t they go with this model.

Magdalena Yesil: So the dot com bust absolutely helped us because what it did was it shrunk the CEO’s budgets and it opened the door to a new model.

Mallun Yen: Well I’m going to shift gears for a moment about 18 months ago I read an op ed that you wrote and it was called that coming out as a woman in V.C. and not to put you on the spot but you’ve been in VC, in venture capital, for over 20 years and you’ve been a woman all your life. And so what made you decide to finally come out as a woman in V.C..

Magdalena Yesil: Yes you’re right. I was the very first op ed I ever wrote and it got published. I was shocked actually that USA Today picked it up. I wrote it because I felt for the very first time a real obligation to stand up and say. I’ve been successful in Silicon Valley. I’ve had a great career. I continue to have a great career.

Magdalena Yesil: And by the way I’m a woman. The reason why I felt very obliged to say this was because I was such a negative environment. I’m talking about you know late 2015 early 2016 when because of the Kleiner Perkins suit by Ellen Pao that the sentiment especially for younger women was very negative like hey everything’s against us. We’ll never be successful we will never be given those positions. And I was looking at myself. Sorry I touched my microphone and I was looking at my friends and saying but there are many many women I know who have been successful. So why don’t we stand up and say “Look at us. You can be successful” So that if I am a 25 year old or a 30 year old or a 35 year old I have some role models that I can say “Yes if they did it, we can do it.” That was the reason why I wrote coming out as a woman in venture capital because especially venture capital has always been viewed as such a you know boys game. And it’s not that it’s not a boys game but it is that someone like me an immigrant a foreigner you know someone with zero pedigree. When I first showed up here can be successful and is all in your performance. I truly believe that and it’s great for people like me to say hey I’m a woman you know. No I’m not neutered. I’m not male. I’m a woman and I can do it. And like you said I had some kids along the way.

Magdalena Yesil: You know and you remember this was 2015. So right after the Ellen Pao verdict there was a lot of hearings about about oh maybe we shouldn’t be hiring women if these issues are going to come up. But a lot has happened since since that article. We have a new administration and about a year ago. Believe it or not it is only about a year ago that Susan Fowler came out with her Uber memo about her strange year at Uber and then it was in July that the Google engineer wrote his memo questioning whether or not women were suited to certain jobs. And since then. The media has been reporting you write there’s high profile fire firings in virtually every industry from medicine to venture capital to tech to academia. I mean I don’t think anything is to the Humane Society actually even recently. And Garrison Keillor. So people are talking about this problem and more and more which I think is progress but in some ways in many ways the world is more polarized than ever. So I have to admit that back during the election, I was one of those people who sort of guffawed when Mike Pence the vice president was saying that you know what.

Mallun Yen: I follow the Billy Graham rule which is I don’t dine with any woman who’s not my wife. And but more and more I’ve been hearing men say that and thinking twice about whether you should have dinner whether you should have drinks. And it’s not just the people that I’m around. Some stats for you. The Harvard Business Review found that 64 percent of executive men were reluctant to have one on one meetings with junior women. And then last summer New York Times found that nearly half of men felt it was inappropriate to have dinner with any woman and 22 percent felt it was inappropriate to have a work meeting alone with a woman. And it’s not one sided. Over half the surveyed women 53 percent felt it was inappropriate to dine alone with a man who was not their spouse. And 44 percent of women objected to lunch and twenty five percent of women objected to having work meetings one on one with a male so Magdalena how much mentorship goes on outside of work and even within work. I mean one on one meetings are obviously hard to avoid sometimes. What do we do?

Magdalena Yesil: Well first of all I just want to say that these statistics for me personally are incredibly disheartening. I thought that when I left Turkey and came to the United States I was coming to an environment where there was a lot more evolution and the way people socialize with each other. I really really was looking forward to that. And I did enjoy that and to hear this now where men. And rightly so I must add are concerned about spending one on one time with women. And women are as well. So here’s my answer to it. First of all absolutely, as women we need to make sure that men do not give up on mentoring us, on sponsoring us, on working with us, because guess what? Still most of the power positions are held by men. So if anything us women are going to suffer from a movement where men start cutting us out because of concern of litigation or allegations. So here is what I think. And this is what I advise women to do and men as well. But I’ll first start with the women and that is if you have a sponsor, if you have a mentor, if you have work relationships where you really think the one on one time is very valuable, you need to be the first to step out and say listen I really really appreciate the time you invest in me.

Magdalena Yesil: I really appreciate the time that you and I are together and you should just know that I know that we are colleagues. I appreciate you as a colleague and I know there’s nothing beyond that so don’t ever worry about being misunderstood because I know where you’re coming from I know where you’re coming from when you hug me I know where I’m coming from when I hug you. So it’s on the table discussed in chapter closed I think putting things on the table articulating intent is the best thing we can do to give each other protection.

Mallun Yen: And in fact I mean this is not a new problem it’s existed for for many years I think it’s only now that it’s being talked about so much in the open and perhaps more people are aware of the sensitivities around it. But but back when you started Cybercash you actually faced a similar situation most of your co-founders. Maybe if all of your co-founders had been older male.

Magdalena Yesil: All my co-founders all my partners in venture capital all my bosses and colleagues in engineering. I mean let’s face it you know you go to engineering school I went from an all girls high school to an old boys engineering school basically.

Mallun Yen: So tell us about. So what did what. What happened when you when you went to start Cybercash you had an older male founder and the founder’s wife who was not so sure he wanted.

Magdalena Yesil: Well yeah I actually think she did something incredibly smart so there was this man who had a very well-known reputation of being a womanizer. Dan Lynch, phenomenal guy, Founder of Interop. And you know very playful in the way he approached women. So his wife found out that he was talking about partnering with a young woman. So in a very wise way she invited me to their house for dinner and she wanted to interview me basically. She wanted to see where I was coming from what my intent was. What was I really serious about doing a company with her husband or did I have other motivations? And at the end of that you know three hour or so dinner she was very comfortable and gave me all her support and encouragement. And again I really to this day now this is a long time ago almost 20 years ago. But I applaud her for doing that because I do think that if you have concerns the best way to address them is by head on don’t talk about it in passing. Put it on the table and I think that it’s important for men and women. And the advice I was going to give men you know is just do the same thing. If you’re mentoring someone who’s younger an attractive young lady I think it’s best to say to her very openly hey I want to support you I want to mentor you I just want you to know that in my mind there is no confusion about where you stand. You know I find you to be a very promising young person and just like I would mentor a young man I want to mentor you period. I think that is really important for both sides.

Mallun Yen: Yes absolutely on both sides right. As the woman to be able to say you know what I appreciate this. And I think sometimes people are not sure whether they should go first. Right. But just having that open dialogue I think is great advice and obviously you’ve seen that work. So So Magdalena’s book is called Power Up how smart women can win in the new economy. It’s a great book. I bought dozens of copies for lots of friends and and I recommend you guys I’ll pick up a copy. Do you have any. Fine. Actually there’s two things. One is it seems really daunting to write a book. And I actually love the story about it about you as a writer. And then second and you can decide what order you want to answer this in. Are there any particular points there’s so many great points in the book but there any pretty good points that have seemed to resonate more especially in this day and age than you might have thought otherwise?

Magdalena Yesil: Ok so the reason why I wrote the book is kind of it’s the continuation of the op ed. The idea was I have had a successful career I’ve had many learnings. I’ve had many failures. So let’s try to bottle it all up and not just mind. But I also interviewed 27 other women so let’s learn let’s basically share our learnings with our readers so that you know in a very open way and in a very pragmatic way actionable advice. What worked for us what didn’t work for us? How did we do some of the hard things? And one of the things that’s hard for people and not just women is we entreat you take some time off? You might have illness or you might go on a world trip or you might be taking care of a ill spouse or ill parent. How do you come back into the workplace or some other very pragmatic?

Magdalena Yesil: How do you get that job promotion that you really and actually get a reputation as one of the stories actually love in your book. Is it the point that you raise which is Magdalena actually resigned from the salesforce board because of an illness. And I think especially as women. Sometimes we feel the need to be perfect, right? And if you can’t be perfectly there because you’re dealing with an illness it’s like OK I’ve got a I’m going to resign. That’s the right thing to do.

Mallun Yen: But in retrospect you said was that yes. Yes. Absolutely.

Magdalena Yesil: Now I think this whole perfection is our our biggest enemy. And I do think that going back to the early days of Salesforce trying to figure out you know what’s good enough and we would have never created the software if we were looking to have perfect software it was good enough. That was the whole philosophy and I think that in my life one of the learnings I’ve had is good enough and stick with that. Don’t try to be perfect because you will opt out of a lot of things just like I did in this one case with a Salesforce board. I voluntarily opt out because I didn’t think I would be perfect and the other thing in the book I say is I never do regret because I think regret is a waste of energy and it’s actually negative energy. So I don’t look back and say oh what if what if I had done this. I don’t regret stuff because each time you give something up you get something else maybe on the scale you know it’s like this but doesn’t matter it still was a trade off. It was a decision. What are the takeaways and I don’t know how many more minutes we have but one of the takeaways. That I didn’t expect that would resonate with the book and with people in the book was this analogy that I opened the book and end the book with and that is where I’m from in Turkey when someone is leaving on a major journey the family the friends and all the neighbors collect around with buckets of water in their hands and as the person is driving away or riding away they’d throw these buckets of water after the person and the message is may you be like water may you always flow to wear it to a destination just like water does.

Magdalena Yesil: Right. I mean if there is a rock that is blocking the way the road of the water it will go around it or sometimes it will go under it but it always go someplace. So that’s a stand off. That they send you away with and very often in my career when I’ve had blocks roadblocks I’ve always said I can flow around this I might not always end up exactly where I thought I was going to end up I might end up in a different place I might have a different trajectory but I’m always moving forward and I’m not in my publisher did as well that this might just not resonate with people this imagery might be just a little too weird and it’s incredible the number of people who reach out to me and say hey I love your imagery and I’m actually using it it’s working for me you know when things get blocked I’m saying to myself no I can flow around us. So to get to flow like water. The other thing about water is it’s flexible. It doesn’t always try to go exactly where it wanted it’ll go wherever it can.

Mallun Yen: Thanks Magdalena. Thank you so much for coming to talk to us today. And and congratulations again on your book. And thank you again.

Magdalena Yesil: Thank you very much. Thank you for having me.

Published on November 27, 2018

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