Join the discussion on how business can be more than just about profit, it’s also about giving back in any and every way they can, especially in these challenging times of Covid-19.
Amy Lesnick | CEO @ Pledge 1%
Yvonne Wassenaar | CEO @ Puppet
Sameer Dholakia | CEO @ SendGrid
Ajay Agarwal | Partner @ Bain Capital
Welcome to Business as a Force for Good: COVID-19 and Beyond. Thank you for joining us. My name is Amy Lesnick and I’m the CEO of Pledge 1%, and I’ll be moderating today’s session. I’m thrilled to be joined today by Sameer Dholakia, CEO of Twilio SendGrid, Yvonne Wassenaar, CEO of Puppet, and Ajay Agarwal, partner at Bain Capital Ventures.
I find that on these calls, it’s especially helpful to have some structure. So let’s take a quick glimpse of what’s ahead. We’re going to start by talking a little bit about why and how companies are giving back today during COVID and also how they’re setting aside equity so that they have the resources to tackle tough challenges in the future.
We’ll be spending most of our time talking about the equity piece. We’ll have two CEO perspectives, one from Twilio SendGrid, and then also from Puppet. Then we’ll have the board and investor perspective from Bain Capital Ventures. You will see a sneak peek of our CEO Playbook with some equity models to really help you get started and then a quick wrap up with a little bit of Q&A. So let’s dig in.
The challenges and uncertainty that we’re facing today right now in this global health and economic crisis are truly unprecedented. Yet in this time of adversity, we’re reminded of what’s important in life. It’s been inspiring to see so many companies, big and small, late-stage, early-stage, public and private, really rallying, stepping up, leveraging all of their resources, whether it’s their money, their expertise, their product, their technology, their employee time, their voice, and their network to really make a difference in this time of need.
I’ll give a few examples, but there’s many, many more on the Pledge 1% website. So we have flex boards who leverage their expertise and connections to deliver over 166 million units of PPEs, supplies, and meals to over 200 cities around the globe.
We have Guild education which really catalyzed and connected private spectrum response with their hashtag, Stop The Spread, getting over 1300 leaders to join in.
Likewise, Canva leveraged their product, really creating a suite of templates that individuals and businesses in schools could use on social to really promote world health organization facts rather than fear.
Okta committed 500,000 and unrestricted rapid response, and also committed $10 million over the next three years to really help nonprofits make the digital transformation. DocuSign, in addition to response funds, has been leveraging their product to accelerate critical agreements that are needed for testing, trials, and healthcare needs.
It’s clear that we are all coming together to tackle COVID-19 head-on, and that together we are a force for good.
As we think about the road ahead, there are numerous models out there that really break things down into three phases or three tracks. I think that many of us are addressing these in parallel. I’m sure all of you have been involved in some sort of scenario planning and mapping out.
I’m going to add a new layer, which is not just the business side, but also the social impact side, and really break these down into three areas.
Respond is really about triage. Recover is really about the reopening and re-imagine is really about growth.
In the response phase, I’m sure many of us were thinking about first things first, our employee health and safety and communications and infrastructure, scenario planning, our own funding, cost controls. But on the give back side, many companies are really diving right into COVID response funding, thinking about how to spin up virtual volunteerism programs and employee matches for their employees that really wanted to feel like they were having a sense of purpose in this time of need. And focusing on the most pressing urgent needs like PPEs, food insecurity, education, and of course, health.
Under the recover stage, which many of us are moving into now, it’s really a stage to return to the workplace, new employee policies. And all of us are really looking at how do we refine our value proposition for our customers given their own evolving needs?
On the giving back side, on the employee engagement, we’re thinking about, wow, this remote workforce is going to be around for a while. So how are we reinforcing our culture and values in this new altered world and empowering our employees?
On the nonprofit side, we’re thinking about the evolving needs beyond those urgent first things in the triage. So it’s thinking about nonprofits and how they can rethink their strategy, their delivery, their fundraising, and their planning. And how are we thinking about rescaling and getting people back to work and especially thinking about how we’re supporting the most vulnerable populations.
As we move into re-imagine, we’re thinking about what can be done now to really accelerate digital transformation and become faster and more relevant to our customers than even before the crisis. On the nonprofit or social impact side, we’re thinking about how do we build back better and how do we really formalize what we’re doing?
For many companies, it’s really thinking about making the commitment now to set aside equity. So thinking about reinforcing your values to your employees and companies beyond the short term actions, really representing a long-term commitment through equity, where you’re setting aside a piece of your future success.
This will also give you the resources in the future to tackle the most pressing issues of our time. I think it’s important to recognize that this is something you can control right now that’s really going to set you up in the long-term. I should also note that this is going on right now, which is why we’re talking about it.
Many folks are reaching out to us, but I put an under re-imagine because we’re re-imagining that post COVID, there could be a world where this is just the new normal or the default or the standard. And setting aside equity for philanthropy is as common as setting it aside for your employee pool. It’s just what people do.
So in the last three years, over $250 million in new philanthropy has been ignited through Pledge member IPOs. It might seem like an odd time for us to be talking about equity and IPOs given the state of the economy and the markets right now, but that said, as I mentioned, a lot of CEOs have been reaching out to us.
I think it’s because both this incredible need that’s clearly out there, and there’s a recognition that it’s very clear that companies have a very important role to play really in working with government and nonprofits to address the most pressing issues of our time. So this is probably a good moment to just take a moment and explain what Pledge 1% is all about.
We are a global movement to create a new normal where social impact is really embedded into the DNA of companies of all sizes and stages. We exist only to inspire, educate, empower every company to really think about how to leverage their assets to be a force for good.
We have over 10,000 companies in 100 countries and we are a global movement. During this period of COVID, we’ve been working and really playing a role as an aggregator, a resource, a convener, and an amplifier of collective impact opportunities. We were most recently, all of our companies came together and they rang the NASDAQ bell on giving Tuesday on May 5th, and really recognize how companies are really coming together to be a force for good.
Back on the equity front, we realized about a year ago that many CEOs want to set aside equity, but there were really no standards on how to do this. So if you imagine what it was like before the NBCA came out with a standard term sheet and how people were trying to invest in startups back then, kind of what’s going on with people trying to do the equity pledge. It’s like snowflakes.
So we’ve been working with CEOs and VCs and attorneys over the last year to really develop some frameworks and templates and moving on to the coming soon side, you’ll see that we are rolling this out. A CEO version as well as an extended version, which gets into the nitty gritty down to S-1 language and board resolutions coming up this summer.
But we have a special exclusive for SaaStr attendees, for all of you. You’re going to get preview access to the CEO Playbook, which really digs into how to get board support and case studies and recommendations from other CEOs. We’re going to be spotlighting some of that during our session today, but you’ll also have access to this to download. So make sure you stick around for the end where we’ll show you the link of how to get that.
With that, let’s dive in. For each of our speakers, I’m going to introduce you and throw out a few questions upfront. You’ll then have some uninterrupted time to really share your valuable insights.
Starting off with you Sameer, as CEO of SendGrid, you’ve helped SendGrid set aside equity on the road to IPO, and you’ve had experience really understanding the value of that and the impact of that equity, both on SendGrid, as well as Twilio. Additionally, you’ve been on our global visionary council and really part of a core group of CEOs and VCs. They’ve been developing these standards.
Sameer, why are you so passionate about this? Specifically setting aside equity and why do you think it’s both the right thing and the smart thing to do? I’m hoping you’ll also share your story at SendGrid and maybe get into a little bit of the nitty gritty of when and why you decided to do this and what model you used and why. Also, if you could share any recommendations you have for CEOs on the call for how to get board support. I know that’s always a tough topic. Then specifically with regard to COVID, maybe share how Twilio’s commitment is really enabling you now to have the funds and resources to respond, and any final thoughts you have for CEOs who are considering this. With that, I’ll turn it over to you, Sameer. Thanks.
I think you’re on mute, Sameer.
Well, let me unmute, there we go. Thank you, Amy. And thank you for everyone who is listening in today on this very important topic at this very important time. Let me start off with the first question.
Why so passionate about this? For three reasons. I would say number one, first is, I have conviction, as Amy mentioned earlier, that businesses have a larger role to play in our society than simply being about generating growth and profits.
We all want to create value for our shareholders to be sure, but there are other stakeholders, our customers, our employees, our suppliers, our communities. I think we’re all re-conceptualizing the impact and the role that business can play, and you see it today, and this COVID pandemic more than ever.
The second reason is just, I would say the industry value creation that has occurred in technology that I have been so privileged to be a part of in my 25-year career and the moral obligation, frankly, that I feel that comes with that.
My personal story, at the ripe age of 17, I just happened by dumb luck to choose to go to a college, Stanford that was based in the heart of Silicon Valley in the mid-nineties. So I just happened to show up at this particular moment in time at that particular geography that was at the epicenter of tech and software, which was still in the early innings of its influence.
I looked back in 1995, Apple had nine billion in revenue, had a four billion dollar market cap relative to a trillion today. Microsoft was enormous at four billion in revenue and a $50 billion market cap, a long way from a trillion in revenue.
The largest companies in the world back then were GE and Exxon and Coca Cola. And truly in the past 25 years, I’d bet our industry has created more value, literally trillions of dollars than any other industry in the history of technology.
The top five most valued companies today are all in technology. Microsoft, Apple, Amazon, Alphabet Google, and Alibaba are the top five. In fact, number six is Facebook and number seven is Tencent. This industry has created trillions, and many of us on this call are privileged to work in this extraordinary sector of the economy at this extraordinary moment in time.
But we all also know that this value creation and access to this industry has not been shared evenly or equally across all groups or demographics in society. So I just feel, and I hope you all will share a deep moral obligation for us to take a small fraction.
Indeed, when I say a small fraction, I mean just 1%. It’s in the name, 1%. 99% goes back to the rest 1% to give back to the communities in which we work, people that need it most who don’t have access to this industry.
Then finally, I would say at a personal level, the reason I love spending so much time helping other CEOs and boards take this pledge is because I believe it’s one of the highest leverage philanthropic activities that I can do.
If I can help convince or enable just one company to take the pledge that makes it to IPO, that’s likely 10 or even tens of millions of charitable dollars that are now activated. I would take me a lot of bake sales at my local school at my kids’ schools to create that much philanthropic activity.
So I just feel like the Pledge 1% Org that Amy leads is a massive force multiplier for good and I’m so privileged to be a part of it.
Amy mentioned this question about why doing this is not just the right thing to do, which it is unquestionably, but it’s also the smart thing to do from a business perspective. I would say to all those listening, thinking about how you’re going to justify, how do I do this?
First off, understand that in this day and age, in a war for talent which exists, the best talent today more than ever cares that their company has a soul, that it serves a greater purpose than simply generating growth or profit. These are the kinds of companies that employees want to work for and where they stay connected, where they stay retained.
Our most recent engagement survey at Twilio when we asked employees, are you proud to work at Twilio, the overwhelming 90 plus percent response was an emphatic yes. And they often specifically cited in the free form response, the philanthropic activities of our twilio.org, which was enabled by our Pledge 1% pledge years ago, and the generosity of our CEO, Jeff Lawson is reasons why they’re so proud to work at Twilio.
You, if you take this pledge, will see this in your business, you will see it in lower attrition rates as we have at Twilio, we have five to 10 point better than average. You’ll see it in your engagement scores, which will be better than average as we have. You’ll see it in your ability to hire and attract great talent.
But it’s not just employees that care about this. Customers want to do business with companies that they like and respect. I can tell you at our Twilio Signal Conference, which is our annual user conference, the highest-rated session every single time, every single year is when we ask a nonprofit that is empowered by twilio.org and our technology to come up and tell their story of how they’re using our platform to go do good in the world.
Customers care. I’ve seen it happen. I’ve seen them become more committed to our company as a result. I can go on and on, but the point that I hope you take away is that you should take this pledge because it’s good business in addition to just being good.
Now, I’ll be honest, two years, I guess two and a half years ago, I thought that I had missed the boat. I thought we had missed the window of taking the pledge ourselves, with just SendGrid.
And I just happened to have had a serendipitous lunch with Jeff Lawson a year before our IPO seeking advice on the process from another CEO that was in SaaS, a dev API focused company and we’d had this great discussion. At the end of the lunch, he said, “Hey, Sameer, have you guys taken the pledge?” And I said, “No, I think we missed that boat. I wish we had done it at our founding.
We’re going to have a billion-dollar IPO here shortly. I can’t imagine our investors, our board, or shareholders getting behind that.” And he said, “I thought the same thing, but we came up with a way to do it. We took the pledge ourselves just months before our IPO.”
I was floored and thrilled at the same time. In short, what he described was what we had pledged now called the Distributed Equity Pledge Model, in which we commit to the full 1%, but it gets spread out over a period of time. In our case, it was 10 years. That had two important benefits.
The first is that the dilution for your investors is minimized and shareholders’ is minimized because it’s spread out. 0.1% per year, 0.1% is a diminimous number. That is smaller than your option pool refresh, it’s way smaller than an executive hire, and you truly are not going to be likely to get much pushback from your board on that.
It also gives your company the opportunity to continue to increase the value of your pledge if you believe you’re going to be creating more and more value as many SaaS companies do compounding on this great recurring revenue stream. In SendGrid’s example, 1% of our IPO was worth about $10 million. I can tell you today, it’s now worth many tens of millions of dollars, that 1%.
So you get to ride the upside and give even more than you thought you could.
The downside of this model, of the distribution, of course, is that the value is not guaranteed. Each year you vote on it. A new CEO or a new board could undo that commitment in the future unlike doing it all upfront, and you’ll hear more about that from Yvonne here shortly as another way to do it.
There’s no right way to do it. We’re going to provide you with these templates that give you two different ways of doing it. The most important thing is that you get it done.
If you go to slide 12 for me, the funny thing about the SendGrid story is that it all hinged on this serendipitous lunch with Jeff. Obviously we’re trying to systematize this now, trying to spread the word with events like these, trying to create this movement. But if Jeff were here, he would tell you that the Twilio story was him being influenced to take the pledge by Marc Benioff of Salesforce fame.
As some of you know, Marc and Salesforce have been huge proponents of 111 from their initial founding. Helped found the Pledge 1% movement years ago with companies like Atlassian and Rally Software and others.
Literally years before the lunch that I had with Jeff, Marc Benioff had been hosting a dinner at his house and had invited a number of SaaS CEOs, including Jeff Lawson from Twilio, to talk to them about Pledge 1% to try to convince them to take it.
One of the CEOs there, as Jeff tells this story, must’ve asked, “What if we didn’t take the pledge at the beginning at our founding like you did Marc with Salesforce?” Marc simply looked up Riley and said, “I don’t know. You’re founders, go figure it out, go figure out how to do it.”
Jeff took that as a challenge and he thought to himself, Marc’s right. That is what founders do. We figure stuff out all day, every day. And that is actually what inspired Jeff to come up and figure out this distributed model that he then passed on to SendGrid, and we are now trying to share with as many companies as possible.
So look, if I piqued your interest at all in considering this equity pledge, I hope I have, some of you listening in. Some tips of advice in slide 13 of what to do. Commit to the discussion, get it on your board meeting agenda, have conviction as you have this conversation.
When you talk about it, explain to your board why you were so passionate about this, remember that your boards are there to support, they want to support their founders and their CEOs. If they know that you care about it, I promise you they’re going to care about it too.
Give them examples that you’re not on an Island here, that SaaS industry leaders like Slack and DocuSign and PagerDuty and SendGrid and Twilio, have all already done this and we’d be happy to put them in touch with any number of our CEOs or other investors.
Make the case that I was sharing earlier about it being good for business, not just being good. By the way, before you get to doing all of that, go build some allies in the board before you get into the room.
Ajay is going to talk about this later, but the one-on-one conversation that happens before the board meeting, pick the people that you know are more likely to support your desire and get that rolling.
Talk about the trade-offs of which model you want to go with and why, but most importantly, relay urgency. You have to get this done before you file the S-1. Once you filed the S-1, the clock is out, that’s your runway. The sooner you can get this locked in the better.
I hear from so many CEOs when I talk to them about this, well, I want to hire a social impact leader first. I want to pick my cause, what should my company get behind?
Those are all wonderful things to consider. You do not need to sort out any of those before you take the pledge. In fact, I’d encourage you to take the pledge, you have the rest of eternity to figure out all the details and the mechanics of how you are going to use those funds, but that’s how you get it set aside.
I would tell you that because Twilio and SendGrid did this, on slide 14, we’re in a position to make such a big difference in this global pandemic. We have, suffice it to say, well north of a hundred million dollars because of that equity pledge that both companies took that we can dedicate to philanthropic activity.
I’ve been so proud to see all the ways in which we’ve been able to use those dollars for good. Our communication platform, which spans text, voices, email video, unto itself is in high demand as people are trying to communicate more in this pandemic.
So our twilio.org team created an access program for an organization that needed credits or discounts to use in their own COVID solutions. We’re giving away our video API to education, healthcare, and nonprofits for the next few months. We’re offering our contact center solution flex at no cost for 20,000 hours a month if an organization directly helping COVID.
We’re working with food pantries to help schedule when recipients can come and pick up food. Crisis text line and the national sexual assault hotline are using our channels to communicate with these at-risk populations.
We just announced the work we’re doing with the city of New York hardest hit by the virus to deploy a contact tracing solution using all of our platforms. That’s just all the tech.
We’ve been giving away grants from that a hundred million dollars. We started with a million and a half. We just added another two million to both globally with the UN Foundations COVID Response Fund, and also locally to Bay area organizations like give to SF, the Silicon Valley Response Fund in Denver, where we have another big office for the COVID relief fund.
And we’re activating our employees. We took the Pledge 1% branding and created something called We Pledge, which is we all the employees pledge 1% of our individual equity finding remote volunteer opportunities, doubling our matching for COVID related donation. So just trying to do so much, and I’m so grateful that we took this pledge because that is how we’ve been able to do all of this good in this crazy pandemic.
My final thoughts for you, in slide 15, I would just say on timing matters, you got to do what’s right for your business right now, make sure your business and employees are on good footing first and foremost, care for their wellbeing.
But I genuinely believe there’s never been a more important time in history for businesses to step up and play a bigger and broader role in our society. We’re learning and teaching all of our children and the people that we cohabitate with that this is a time of we, not I, this is about our communities, not about our individual businesses.
I think that’s an important message. So please leverage this great organization, Pledge 1%, we’re here to help you do this. Please take the pledge, be a role model, and help us build this movement. Amy, thank you so much for the time and opportunity to share the story. Back to you.
Thank you, Sameer. We really appreciate your candidness and really sharing your story and your advice.
We’re going to jump over to Yvonne now to hear another CEO perspective. And it’s worth noting that whilst Sameer chose to use the 1% distributing corporate model, Yvonne actually uses a different model, which is the 1% upfront model, and she’s going to talk a little bit about that at Puppet. We’re so excited to have you, Yvonne.
I hope you don’t mind me sharing that as CEO of Puppet, you fought hard for the equity pledge from day one and it actually took some time, but I think you just finalized it right before we were originally going to do our in-person panel, the SaaStr Summit before all this craziness started to go down and we all had to shelter from home. Once again, I’m going to throw a couple of questions out to you upfront, Yvonne, and then turn it over to you.
First, I’m hoping you can share your story. Why do you care so deeply about this, Yvonne, and what was your experience at Puppet? Why did you decide to go with the 1% upfront model? What do you see as the pros and cons? How did you get board support?
We’d also love for you to share any advice that you have for CEOs and founders, especially in light of COVID-19 and knowing that a lot of folks on the call are probably early or mid-stage. So any advice that you might have for some earlier folks.
Then finally, as you know, Pledge 1% is really about empowering companies to leverage all of their assets for good. The real magic comes in when you combine the equity or profit with time and product and really thinking about embedding it into the core DNA of your company. I know that that’s what you’ve done at Puppet. So hoping you can share a little bit about how you’ve done that as well. With that, I’ll turn it over to you. Thanks.
Perfect. Absolutely. I’m super excited to be here. Can you hear me, Amy?
Yep. All good.
Super excited to be here and it’s such a great opportunity to share the learnings. I think Sameer did such a beautiful job framing up why this is important for all of us to engage in particularly more now than ever.
What he hit on, I think is a lot of this importance of the increasing disparity of wealth and the importance of social consciousness and the fact that if we want to have and be part of healthy thriving worlds, it can’t be the haves and the have nots.
I do believe that there is both a personal, but also a business reason for us to collectively find ways to create a better planet. You have to start change. You can’t expect others to do it for you.
So to me, what I think is really important is that true change is not just a single event, but it becomes a way of being. I think that to me is what’s so important about the 1% pledge. We talk a lot about the equity piece, which I think is foundational.
In some regards, sometimes one of the hardest pieces, but it’s a piece of an overall program, which is part of the composition of who we are, how we act, how we show up.
I think to echo what Sameer said, it’s a big piece of the culture that you’re creating and the legacy that you’re going to leave for those that come behind you. So to me, it’s important to have that change and that commitment shows up in terms of innovation.
We’re incredibly innovative as companies. It’s important to show up in the form of care and empathy and understanding. It’s important to show up in the presence of time. But it’s also important to show up in the presence of funding.
One of the most important lessons my dad taught me when I was a little girl, was the power of compounded interest. To me, doing the 1% pledge and I think doing it early is really around creating that future value. So with that, if we move on to the questions, I think, why I care so deeply about this, I touched on a bit.
Let me move to what Puppet did and why I care. You mentioned, Amy, I came into Puppet, I joined Puppet about a year and a half ago. It was really my first board meeting or actually right after my first board meeting, I went to one of my board members, Jen Sahada at PagerDuty, who also committed to the 1% pledge.
I talked to her, I said, “Jen,” I said, “I feel really passionate about doing the 1% pledge at Puppet.” What I noticed at New Relic is I led data nerds for good, but at the time we fought for funding out of the regular P&L and it’s hard sometimes to put aside that money for the nonprofit stuff when you’re still trying to drive business.
It really hit home to me that you need to create mechanisms and organizations and ways to make those right decisions easier to implement. I had great support from Jen. We did go and we did the 1% upfront. I’m a big believer in that in the sense that, we’re a little bit further away from an IPO.
There’s many different exits we can have, and we wanted to make sure that our legacy would be fully paid. So by committing that 1% upfront, certainly if we IPO, but also for some reason we decided to sell the company, we’re still committing that money.
I think that was a very important concept for us from a cultural standpoint. The other important thing, which was a little scary upfront is, you don’t have to set up a nonprofit. You actually can use a donor-advised fund.
We use the Tides Foundation, but we didn’t have to set up a nonprofit to make this work.
If you go to the next slide, what I would say to build on Sameer’s comments, one is, super important to build on a strong commitment and community of giving. When I talk about it being a way of being, it’s not just setting aside equity, it needs to be incorporated into your culture, into your values and your beliefs as a company, and the role that you play in society around you.
What I found from a selling perspective to my board, I took a very personal approach. I knew I had the support of Jen because she had done this for her company. But I went and I looked into what were the commitments that my board members and/or their companies had made that I could then align to?
For example, VMware is on our board and they’ve done a lot with their foundation. So framing my desire to have Puppet give back and contribute just like VMware was doing with their work.
I did similar things with my other board members, which was a great way to suck them in because they were already passionate believers in giving back, and this was them supporting us and what they knew what was important to our culture.
Leveraging experts, it’s complex. I love that you’re coming out with a playbook. It’s a lot to figure out and we had great help along the way. If you do that, again, you can break through the concerns or the obstacles that your board members might have because you’ve got the data, you’ve got the fact, you’ve got the plans.
I think that builds confidence that yes, you’re committed. It makes sense, and they see how it’s gonna play out. I believe that doing the 1% upfront, if you can get that across the line, is the best way to go. Sometimes you can’t. The numbers look too big, people have too much nervousness.
For us we’re able to build that momentum. I think it’s the safest way to get it there and then let it grow and go on and do the other great things. I want to close out on this concept of building on a culture of commitment.
It was a huge, huge shot in the arm when I could go back to the company and tell them that we signed up for this. I think to what Sameer said, our team really cares about giving. We already have four community service days a year. We leverage our space.
We’re an innovation lab. We’re built on open source. We’ve had a lot of different initiatives come out in the face of the Coronavirus pandemic.
For us, one of our core values is community empowered and engaging the community. Being able to start with that and having our board understand that is who we are, it was very natural for us to work through it.
It still took a little over between nine and 12 months to get all the things detailed out and warrants written and votes taken on the board. But I had commitment within the first three months from everybody on the board. And from there, it was really just working through the process and getting it done and thrilled to be one of the folks at 1% and hope others of you out there will go on that journey with us.
Well, thank you, Yvonne. I love what you were saying that true change is not a single event. It’s really a way of being. I think that’s exactly clearly what you’re doing a Puppet and Sameer is doing at SendGrid Twilio.
And you could see it in the pledge companies and it’s really the movement that we’re trying to create. Since you brought up open source, I will just mention, and we’ll talk a little bit about this later that we’re able to have this playbook because of this open-source nature of the Pledge 1% movement.
All of our members are really co-creating these standards. So to the extent that you read it and you have other challenges that you’re facing, help us please flag the challenges and also help us build the solutions. I think this is how behaviors are changed. It’s really co-creating this and making this happen. We’re so thankful to everyone who was willing to open up and be so authentic and sharing their experiences with us. It’s what got us to this point.
I’m going to shift gears now and I’m super excited to turn things over to Ajay.
Ajay, you’ve been a venture capitalist for over 20 years or nearly 20 years. I think that you just recently in the last couple of years been personally involved with setting aside the equity at Gainsight and SendGrid.
I know that Bain Capital has also been involved with setting the equity aside at DocuSign and really helping get that across the finish line. I’m hoping that you can help us understand this from a board perspective. I think Sameer can attest that every time we bring this up with CEOs, the most popular conversation aside from the models is, how do I get my board onboard?
So any insights you have from your experience going through this with Gainsight and SendGrid, please share with us why you’re so committed to being what we call it Pledge 1% of boardroom ally, and helping to really do this.
How does this fit into your values at Bain Capital and why do you think that other VCs or any other funders that are on the line should also be supporting this as well?
Well, thank you, Amy. And thank you for including me in this important session and also thanks to Jason Lemkin and the entire SaaStr team for hosting today’s discussion.
As you mentioned, I’ve been at Bain now 17 years. Prior to that, I spent time at multiple startups, including the one where I had the fortune of meeting Sameer years ago. I think what’s interesting about this crisis, it really is a tale of two worlds.
When you look at the technology industry where all of us spend our time and most of the participants, the stock market for tech stocks is at an all-time high. Given the nature of our work, we can all shift to work from home seamlessly. Most of the tech companies have said, work from home indefinitely or forever. So we have enormous advantages in this crisis.
Then outside of tech, you see the rest of the world and the rest of the country where unemployment rates are north of 20%. You have a hundred million people who cannot work from home given the nature of their jobs.
So they either don’t work or they have to go and put themselves potentially at risk given that we don’t have a vaccine. I think for our startup leaders in our portfolio, it’s a strange, surreal existence because they feel like, in the office at work, we’re more productive, we’re accelerating, all these tailwinds are happening, but then our communities and our country and our planet just have been destroyed.
I think there’s been a remarkable amount of energy that we’ve seen across our companies to find ways to give back and to contribute to the community. I think Sameer phrased it very eloquently where he said, “Look, the nature of capitalism is changing.”
When I think about our CEOs in the Bain Capital portfolio, not just in ventures, but also in our private equity businesses or life sciences businesses, they very much embrace this concept of stakeholder capitalism. That’s not just the shareholder, it’s the broader set of stakeholders that include our customers, our employees, and our community.
I think that’s where the Pledge 1% makes a lot of sense. We’ve certainly had experience in the boardroom with Gainsight and SendGrid, where I’m on the board at Gainsight and was on the board at SendGrid when we made the decision.
My partner, Enrique Salem was on board at DocuSign. He’s also on the board at Atlassian. Atlassian is certainly one of the early pioneers around Pledge 1%.
So we are deeply passionate about this at Bain Capital. If you think about our firm, we’re started 35 years ago. Today, we manage about a hundred billion across a variety of businesses across the globe. Given that global perspective, we have a vantage point on this crisis that is unique in the sense that we’re seeing what’s happening country by country.
What we’ve seen as an organization at Bain Capital, part of the reason we’ve been able to build something so enduring is this notion of giving back is a core part of the value of the firm.
The day you get to Bain Capital, the senior partners really set the example that, look, we’re here to deliver returns to our investors, but with that comes a great deal of responsibility to be involved and give back to our communities. For example, around the COVID crisis as a firm, we’ve committed $40 million to give back across the globe. We’re featuring all of our portfolio companies, including many of our venture companies, in terms of the work that they’re doing.
The reason we do that, and I think this is why VCs and board members should support the 1%, is we think it builds a great culture. We at Bain Capital, just like all of our startups, the single most important asset we have is our people. And the single most difficult thing we have to undertake is recruiting the very best to our organization.
When you think about an important criteria for why people join Bain Capital, why they join many of our portfolio companies, is they want to be something bigger, be part of something bigger than just a job. They want to be part of a community. They want to be part of an organization that is doing great things.
We found in our organization that this notion of giving back is so energizing for the employees and for the culture. So I completely agree with Sameer and Yvonne that it’s the right thing to do. I think this is what the future of capitalism is all about.
I think the tech industry in particular, and especially in this crisis, has an obligation to really take the lead here. But I think it’s the core to building a built to last culture.
To me, even if you want to look at this purely from a shareholder perspective, let’s go back to the old school definition of capitalism, I still think it’s a good thing because you’re going to create a culture that is enduring. You’re going to have an employee base that’s energized.
I think about our 1,000 employees across the globe at Bain Capital and the amount of energy that has been unleashed through all the work around the COVID response is really inspiring and true at our startups as well. I think this is the reason I’m so excited about it.
This is the reason I’m supportive of it at Gainsight and SendGrid. I think it certainly starts with a founder and a CEO, you folks like Sameer and Yvonne, that are passionate, that believe in culture, that you’re really creating a mission for the organization that’s exciting and inspiring.
But I think the combo of a board that’s supportive, but really starting with those tech leaders and CEOs that are also passionate, this is such a no brainer. If there was ever a time for companies in our industry to step up, it’s now.
Well, thank you, Ajay. Wow, $40 million. It’s really incredible to see how deeply this really aligns with your values at Bain, and thank you so much for sharing that.
I’m sure it’s really reassuring for a lot of the CEOs on the call to hear directly from you, how supportive you are and how supportive other top VCs are in really thinking that, I think going back to what Sameer talked about, that’s in the beginning, not only is it the right thing to do but actually it’s a smart thing to do in terms of building a culture that’s sustainable and that will actually attract top talent and that will actually be a successful company.
I love how you put it. Even the pure old school way of defining stakeholder, shareholder, even someone like that would see that this is still the right thing to do.
I think that that is, I think really reassuring for a lot of CEOs who I think maybe think that they need the permission of their VCs to do this, to understand like, no, actually it’s, I think increasingly understood that this is what it takes to be a successful company, and it’s really the right thing to do. Because we can right now, and because it’s really needed. So thank you so much for sharing that.
I’m going to jump a little bit to, I promised to sneak peek and we’ve got a lot to get through in just a few minutes. So I’m going to really, really quickly talk about some of the content that’s in the CEO Playbook.
But as I mentioned, all of this is going to be a special SaaStr sneak peek exclusive that you guys will have the answer. Julie, if we could go to the next slide.
When you’re thinking about equity, the first thing you think about is, what is your equity source? We’ve talked about corporate today on the call. But the source could also be from founders.
Atlassian, which Ajay brought up, is an example where the two co-founders, Mike and Scott, personally pulled together their own personal equity to form the corporate foundation. That’s the Atlassian Foundation. That’s separate from whatever thing they’re doing, personally for their own personal philanthropy. They use their own founders’ shares to create the Atlassian Foundation because they believe so strongly in this.
Then there are models which are hybrids like Lookout, where it was both the corporate equity, as well as the founder equity. They came together to create that.
Moving onto the next slide. If we dig a little bit more into the corporate equity, we talked about two models today. There’s the 1% upfront model, which is what Yvonne did at Puppet, and the 1% distributed, which Sameer did at SendGrid.
Quick and dirty on this, is just upfront is really great, especially if you’re early or mid-stage. It’s a great way to lock in your social impact legacy because it is legally binding. But the downside of that is you’ve got to get the 1% upfront shareholder dilution, especially if you are later stage, that can be hard to do.
If it’s a choice between not doing it or doing it, I totally 100% agree with Sameer, just get it done, do whatever is really going to work for your company and your board to make it possible.
On the 1% distributed model, the positive, then we’re going to go back to the last slide. We’re going to let you spread out your shareholder’s dilution. But the downside is potential for reduced social impact.
Sameer was really, really fortunate at SendGrid that SendGrid was acquired by Twilio and Twilio also shared the same values and absolutely honored the commitment, but it could have had a different outcome.
That’s why there are definite pros and cons. In both cases, you can position this so that you can ride the upside of the stock. And both are just excellent, excellent models. So there’s no right or wrong. It’d be totally depending on where you are and what’s right for you.
Okay. Next slide. Just quickly talking, there’s also two little flavors for the founder equity models. There are pre-exit and post-exit. Both are legally binding in this case. Pre-exit, you’re actually transferring the shares upfront.
You can see examples of companies that envision that. Like Atlassian and Vlocity and Code42. I am not a tax consultant, I’m not who I claim to me, but this might not be the best optimization for your personal taxes. On the post-exit, it might be better from a personal tax perspective, but then again you’re introducing some risk as in the other model.
So jumping to the next slide, there are other considerations. Don’t have a lot of time to go through this. But things don’t mind to think about are, you might want to set up upfront in your board resolution, or as you’re thinking about this, what happens in a change of ownership?
Does your commitment accelerate, does some of it accelerate? Does it go away? You also might want to think about if you’re doing the 1% distributed model, could you lock in at least some of it upfront, maybe a 0.1% of that 0.1%?
Social impact dilution for those of you who are doing it really early, do you want to think about an intent to top it off before your liquidity event? Because that 1% that’s done in a series A won’t be 1% at the very end if things go well.
Think about writing upside to your stock as Sameer, pointing out that the 10 million that was the original value is much, much more because the stock has risen and things have gone well.
Also, what Yvonne was mentioning, leverage a donor-advised fund. We’ve got preferred partners and we can totally walk you through it. There’s no need to set up a foundation or a nonprofit, there’s many easy ways to do to get the spin-up quickly and to help you do that.
With that, will go the next slide. The most important thing really to remember is that Pledge 1% is really here for you. The Equity Playbook, there’s resources and support. As I mentioned, we’ve got the version for the CEO’s, but we also have the nitty-gritty.
We’ve got resources and consult. I have an amazing colleague who’s working with me, Jan, you’re going to receive an email from her if you download the Equity Playbook. she’s a former GC herself, So she speaks attorney and she’s very well versed in all of this, can really take you through the models.
We also have other resources for other types of pledges. If you’re interested in getting involved in the movement overall, you can just go to P1.today, take the shortcut, sign up, It takes 30 seconds, and just be part of the movement. We also have great resources right now around COVID. We’ll go to the next slide.
Here’s the special SaaStr offer. We are not officially releasing this until the summer, but all of you can actually go on right now and get access to this playbook. The shortcut is just p1.today/equity.
You can download it and you’ll also receive an email after you download it, it will give you access to either office hours or a one-on-one consult to get more information.
If you’re a VC or you’re on the board of an organization or you’re attorney and you want to learn more about our boardroom allies program, so these are the VCs that are actually really supporting this effort, please email us at firstname.lastname@example.org. If you have general questions, feel free to just email us at email@example.com. Go to the next.
Yeah, with that, I’ll just say before we move on to Q&A, I just wanted to take a quick moment to just thank all of my fellow panelists for your incredible leadership in the movement.
We’re really here and we have a playbook because of people like you. Hopefully, all of you in the audience or listening, we’ll be taking this next step and potentially passing the Baton and speaking on your own sessions.
This is the way behaviors really change. So thank you for all that, everyone on our panel, and all of you out there are really doing every day to really be a force for good.
Also, want to thank Debra and Tammy and Jason, and SaaStr, as well as all of you who participated in this session. I will let you know that we’ll hit maybe like one Q&A, but just want to let you know that again, I think a lot of your questions will be answered by downloading the playbook and in these sessions. We’ll also try and hit a few of them on our blog.
Let’s see, how much time do we have? We actually don’t have time for Q&A, so my apologies on that front. But I really do think we’ve got a number of ways set up. I want to strongly encourage you to go and download the playbook.
Thank you again for participating. I’ll just echo the words of our panelists, that there’s really never been a more important time for companies like yours to really leverage their assets to be a force for good.
So, please join us, check out the playbook, let us know how we can help you. Know that we’re here for you. Stay safe, and thank you very much. Goodbye.