SaaStr Podcast #188: Fouad ElNaggar, Founder & CEO @ Sapho Shares The Benefits of Being Old In SaaS

Welcome to Episode 188! Fouad ElNaggar is the Founder & CEO @ Sapho, the only employee experience portal designed for the digital workforce. To date, Ray has raised over $27m in funding with Sapho from some real favorites of ours including Ray @ Caffeinated, Felicis, Uncork, Bloomberg Beta, Clark Landry and Howard Lindzon @ Social Leverage, just to name a few. Prior to founding Sapho, Fouad was the Chief Strategy Officer at CBS Interactive overseeing strategy, operations, partnerships, and M&A. At CBSi, Fouad structured deals with partners such as Yahoo, IAC, and Twitch and acquired premium brands such as TV Guide and Giant Bomb. Prior to CBSi, Fouad was a VC at Redpoint Ventures overseeing the firm’s LA office and helping establish a dedicated fund in Brazil. Fouad has previously founded three venture-backed companies – Marketing Technology Solutions (acquired), Liquid Light (acquired), and Hark.

In Today’s Episode You Will Learn:

* How Fouad made his way from the world of VC to the world of CBS and media to founding SaaS companies being a serial SaaS founder with his 4th company, Sapho.
* What does Fouad mean when he says the role of the CEO is to be an “inspirational asshole”? Why is this role so crucial and how is it embodied both in the approach to inspiring a team and driving goals and decision-making? How does Fouad think about structuring decision-making internally? Where do so many go wrong in implementing a decision-making process?
* Why is Fouad a believer that “it is about coaching and promoting rather than signal hiring”? What does Fouad really interpret as signal hiring? When does signal hiring work well? How does Fouad determine when a stretch VP is a stretch too far? What are the leading indicators? Does Fouad agree with Mariam Naficy that rotation of function is key to internal upscaling?
* What does Fouad believe are the 2 fundamental benefits of “being old” in SaaS? How would Fouad respond to the suggestion that the rate of decay on experience has never been greater with Moore’s law effect on technology? Applied to hiring, how does Fouad think about the decision to hire a jack of all trades vs a specialist? When is the time to make the transition?

Fouad’s 60 Second SaaStr

* What does Fouad know now that he wishes he had known at the beginning?
* A moment in Fouad’s business life that changed the way he thinks?
* What would Fouad most like to change in the world of SaaS today?

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Jason Lemkin
Harry Stebbings
SaaStr
Fouad ElNaggar

Transcript

Harry Stebbings: You are listening to the official SaaStr Podcast, with me, Harry Stebbings. It’d be fantastic to see you on Instagram, @hstebbings1996 with two B’s, where you can not only submit guest suggestions for future episodes, but you can also suggest questions you’d like to hear asked. It’d be fantastic to see you there.

But to my guest today, and I have to say, this was arguably one of the most enjoyable episodes I’ve ever done. I have to say it is slightly longer, but we just couldn’t stop chatting. With that in mind, I’m thrilled to welcome Fouad ElNaggar, founder and CEO at Sapho, the only employee experience portal designed for the digital workforce. And to date, Fouad has raised over 27 million dollars in funding with Sapho from some real favorites of ours, including Ray at Caffeinated, Felicis Uncork, Bloomberg Beta, Clark Landry, and Howard Lindzon at Social Leverage, just to name a few. And prior to founding Sapho, Fouad was the chief strategy officer at CBS Interactive, overseeing strategy, operations, partnerships and M&A. At CBS, Fouad structured deals with partners such as Yahoo, IAC, and Twitch, and acquired premium brands such as TV Guide and Giant Bomb.

And prior to CBS, Fouad was a VC at Redpoint Ventures overseeing the firm’s LA office, and helping establish a dedicated fund in Brazil. Fouad also previously founded three venture backed companies, Marketing Technology Solutions acquired, Liquid Light acquired, and Hark also.

I do also want to say a huge thank you to Ray Tonsing and Andy Rankin for the intro to Fouad today. I really do so appreciate that.

However, that’s quite enough from me, so now I’m phenomenally excited to welcome Fouad ElNaggar, founder and CEO at Sapho.

Announcer: Good! That’s perfect. Okay, I think we’re warmed up.

Harry: Fouad, it’s absolutely fantastic to have you on the show today. I heard so many great things from Ray Tonsing, from Roy Bahat, so thank you so much for joining me today.

Fouad ElNaggar: Oh great, thanks for having me. I apologize to your listeners in advance, everything that you’ve heard from Ray and Roy are lies and exaggerations.

Harry: Well that is very unlike Ray and Roy, but I would love to kick off today with a little about you and how you came to make your way into the world of SaaS. Let’s start with that.

Fouad: Cool, well, first I would start by saying that Sapho isn’t a SaaS product, so I laughed a little bit when you reached out initially. For me software is about improving the employee experience. It’s not just about how the software is delivered. So I hope it’s okay with your audience and that they humor a discussion with an enterprise software company. I think at the end of the day that’s what all SaaS companies are as well, enterprise software companies.

But how I ended up at Sapho, me and my co-founder, we wanted to invent the future of work. I think if you look back since the 70’s, every decade you’ve seen kind of a huge change in how people work. Whether it was mainframes in the 70’s, PCs coming into the workplace in the 80’s, whether it was introducing Office and Outlook and internet at your desk in the 90’s, mobility after that. Every decade we’ve seen this big change. I always ask people, Is SaaS really a fundamental change in how we work? It is a delivery mechanism and a new business model.

I talk about this with our customers all the time, does Workday, is it that different from PeopleSoft? I mean, they look at work the same. If you look at SalesForce versus Siebel, they kind of look at work the same, and it makes sense cause they were built by the same people. But for us, we said, ‘Okay, let’s go change this. Let’s go rethink work.’ We helped the biggest companies in the world triple employee engagement and productivity, and we give them a new way to engage and a new intelligence model that leverages their existing and new systems of record. So that’s what’s really been driving me in the world of software here over the last five years.

Harry: Well I always say that I love a contrarian guest, and so I can tell this is gonna be a very special episode, but I do want to break it up today into three different, but aligned parts. Starting with your role and position as kind of CEO and leader, so, you said to me before that you have to be an inspirational asshole. Now, tell me Fouad, what do you mean by inspirational asshole? Let’s start on that.

Fouad: Okay, sure. By the way, I love the way that you spell asshole, it made me laugh every time I saw it.

Harry: You do the two S’s, don’t you? Asshole?

Fouad: That’s right, that’s right. I’m an ugly American, so that’s kind of how we do it.

But I will say this, the CEO job is a tough one, right? Especially because you’re in hyper-growth and scaling mode, and a big part of your job in that mode is you’ve got to kind of perfectly balance creating this sense of urgency and accountability for your team while also keeping them inspired and reminding them why they’re here with you, right? Why you’re on this mission together. Keeping that balance, in my experience, and again, I hate when people give generic advice on these things, but in my experience it requires being an inspirational asshole.

If you’re just an inspirational CEO, you’ll end up having a bunch of acolytes and believers who bathe in the glory of this vision and feel great about themselves, and then forget that they’re burning $25,000 a day, headed towards an ice burg. You and I know a lot of companies like this.

On the other hand, if you’re just about creating urgency and criticizing and pointing out problems all the time, you burn out your team. You drive them into the ground. You make them miserable and when people are miserable they forget why they’re there. And if you want to have the best people, you’ve got to have kind of a balance of those two things.

So, for me, I’m constantly reminding people we’re trying to change the human productivity equation with intelligence augmentation, and this is important. This is important to the world. Productivity is the primary driver of GDP, it’s the primary driver of quality of life, and when we impact 20, 30 million employees that are customers, the impact could be tremendous. But to do that, again, you’ve got to be a little bit of an ass sometimes.

Marc Andreessen just did some tweet storm about all these books that he’s been reading, and one of them that he tweeted out that I like is The Courage to be Disliked. You know, and everybody should read it. It was really big in Asia a while ago.

But again, you have to inspire your people, but you also got to push them to be their best and that kind of requires being a bit of an asshole sometimes.

Harry: Can I ask, you manage to narrow accountability quite a few times. I’m intrigued, how do you create this sense of accountability but without the fear of, maybe, not hitting the target, and that kind of fear of repercussions, so to speak?

Fouad: A bit part of that is really about the culture that you create in your organization. So, in our organization I have been a huge advocate of the idea of decision journals. For me, creating a framework for my organization, cause to really scale you have to be ready to delegate. You have to. And it’s a mistake that a lot of people make as they’re hitting the scaling phase, they refuse to delegate. Delegation means you’ve got to make sure your entire team has a shared framework, a way of thinking about problems, and decision journals is a great way to do that.

Now, when we go in and we make a decision in my organization, whether it’s we’re going to support this event, or we’re going to change our price per user per month, people put a decision journal together. And a decision journal’s really simple. It’s hey, here’s a decision that we’re gonna be making, here’s why we’re making that decision. Here’s our expectation of what happens, and here’s how we’re gonna measure it.

And the beauty of a decision journal is you eliminate this, kind of, rewriting history. You eliminate, ‘Oh no, I made this decision, I knew this was gonna happen.’ You create a framework for people to look back and have really rational discussions about how things work, and if you have the right culture, our culture here is about experimentation, it’s about being proactive, it’s about testing things, people start to learn, okay, as long as I have a good rationale behind the decision I make, it doesn’t matter if it doesn’t work. As long as I learn something. As long as I put a framework together around it, and I can take that learning now and put it back into the system and make a better decision next time, that’s how we can manage accountability and scale as an organization. Does that make sense?

Harry: It absolutely does, but clearly you’ve put a lot into the decision making framework that you have in place internally. I have to ask, where do you, as you said, we’ve both seen many companies around us with higher burn rates, where do you see many founders and startups around you go wrong in their decision making?

Fouad: You know, I think a big part of it is when you don’t really understand the biology of your business. I think that is a huge place that people can make a mistake, because it’s hard for you to put a framework in place where all of the results have to feed into some grander vision, right? A business vision.

I would say people in Silicon Valley are really great at laying out a company vision, ‘Here’s how we’re going to change the world.’ I think they don’t do a great job of laying out a business vision, which is ‘We’re going to change the world doing X, and here’s how that business model’s gonna work to support us changing the world.’ That’s a huge mistake that I see people make all the time. They’ve got a great company vision, but there’s not a business vision to match it.

So when you don’t have a business vision or a framework in which you can have all your decisions roll up into a higher level strategy, that’s how you can see some decision making go awry. People in marketing are making decisions assuming something. People in sales are making decisions doing something else. People in product are making decisions doing something else. You need to understand the whole biology of the system to make decisions. There’s so many of these blogs and there’s so many people doing content marketing, ‘Seven Ways to Build a Sexier Startup.’ So much advice out there and a lot of it’s, like, what’s your one key metric? And growth, growth, growth, growth, growth, growth, growth.

We have done a disservice with some of that stuff, where people are like, ‘Okay, here’s a way throughout the history of business has been proven a great way to have growth: sell a dollar for 75 cents.’ That works! People will line up around the block to buy a dollar for 75 cents, but is that a business vision that supports a company vision? I’m not sure. And that’s why all these things have to work together.

Again, frameworks. Frameworks are so important for driving decisions.

Harry: Can I ask you, you said that about growth, growth, growth in those blogs, and kind of content marketing pieces. One thing that struck me when I was reviewing Sapho and doing the work before the show was you’ve raised relatively little money considering where you’re at compared to the competition. What was the thought process around that?

Fouad: So, let me break that question down to a couple parts. First, and if you talk to Roy or Ray or any of the other people in my network, I think one thing that they’ll tell you is I’m super cheap. Both of my parents are immigrants. My dad grew up on a farm in Egypt, came to America with 17 dollars to his name, and my mom is an immigrant from Mexico. When you grow up the way that we did, they’re both scientists, you treasure every dollar. You especially treasure every dollar when it’s not yours, and so the way that we just run as an organization, when you look at our core cultural values at Sapho one of them is ownership. I ask everyone to be like an owner, act like an owner, spend money like an owner of the organization. So, that’s one thing. Culturally you’ve got to kind of set that foundation for, ‘Hey, here’s how we’re going to spend money.’

The second pin is, we talked about kind of scaling an organization for a little bit at the beginning. A lot of people think that scaling means throwing bodies at a problem, especially younger people, right? They don’t have the experience to see that, I think Warren Buffet talked about you can’t have nine women give birth in one month. It’s gonna take nine months to incubate and bake that baby to full term. A lot of people make the mistake of, ‘I raised money! I’ve got to go and hire a lot of people right now and that’s gonna help me accelerate!’ Into where you’re going. But for us, selling into our customer base is Fortune 1000, Global Fortune 500, to build the software that we did we had to be patient, we had to take our time. We had to make sure that it worked in data centers. We had to make sure it worked in virtual private clouds. We had to make sure that it could push mission critical data, the largest companies in the world.

So if you take that approach that says I’m not gonna over-hire, I’m gonna hire into my evaluation. I will tell you this, sometimes it drives my board crazy. You can go ask Bill Coleman or Sandeep from [inaudible 00:12:16], or Ray. Sometimes they’re like, ‘Spend! Spend! Spend! Spend!’ You know? ‘Go faster! Go faster!’ But, we’ve been really patient and deliberate about how we’ve spent money. Again, I view every dollar that I’ve raised from an investor as an obligation, as something that I have to live up to. I’ve got to be a good steward of that capital.

We’ve just been really thoughtful of how we’ve designed our organization, how we designed our scaling plan. We’ve been thinking about building this business our entire lives. Peter and I have started nine venture backed companies between the two of us. We understand what it takes to get to market. We understand what it takes to be successful. And we work like hell to be capital efficient, and a big piece of that kind of goes back to what we were just talking about around understanding the biology of your organization.

Experimenting quickly. Experimenting means I’m gonna find out something doesn’t work. Great. I’ll stop doing it. Some organizations are willing to not experiment. They’ll say, ‘I’m gonna do this because I read in some blog post by Tom Marston, goes that this is the process that you’ve got to do to be an effective SaaS marketer. So I’m gonna go and do these eight things that were in the blog post. I’m not going to test and measure whether it’s gonna work or not, but I’m gonna check the boxes that I at least did all those things.’ Sometimes that can kind of get you upside down. We’ve just had a different model, I would say, as we’ve grown and scaled the business.

Harry: You said about kind of the biology of the business, quite a few times there. When we spoke before you said it’s about coaching and promoting versus signal hiring. Before we dive into the why here, I’ve got to ask, Fouad, what do you mean when you say signal hiring?

Fouad: So, signal hiring I would say, you’re a startup, just raised your series A and you’re amazing. You crossed the chasm. Now I’m gonna hire someone to check a box, and I’m gonna pay a big retain recruiter fee at one of the great recruiter firms here at Silicon Valley. I’m gonna feel really important because I’m working with XY and Z firm. And then I go and buy a resume into the company. I called it signal hire cause I’m signaling to the world, and to your board who’re often pushing a signal hire, that I’m a big shot. I’ve made it. I can afford to get somebody who was a VP at Google, and sometimes that just isn’t the right person for your organization. Does that make sense as a definition for a signal hire?

Harry: It totally makes sense. So now we’ve cleared that up though, what makes you believe that maybe the signal hiring is so wrong, and that actually kind of coaching and promotion internal is a more effective solution?

Fouad: So, again, there’s no strict rules for things. It’s always a balance.

I was saying earlier about being an inspirational asshole, it’s a balance. I’ve got to inspire, I’ve got to be an asshole, right? This is the hardest part of being a CEO: Balancing. You can’t be so dogmatic that you just run into an iceberg. So, when I say coaching a promotion works, again, it’s not the right approach for every single position in the company, but if you hire the right people in the organization, people who have curiosity, people who have desire to be excellent, people who have intelligence, people who have potential, it could be really powerful. And the reason is that these people, they already understand your culture. They’ve already bought into your vision. They’ve actually already seen mistakes that have been made. And now the question is whether they are capable of doing that next-level job.

So, if you think about when you bring a new hire on-board, there’s just a learning curve. It’s gonna take 4-6 months, especially if you’re a more advanced organization. For somebody to understand your culture, understand how things get done, understand the personalities. And by the way, they haven’t seen the mistakes that’ve already been made, and a lot of people, again, need to make the mistake themselves for them to accept that somethings not going to work.

So, when you coach internally, and you have the right type of person, you’re not gonna pay for that cultural or company learning-curve. You’re not gonna lose that time to get somebody up that learning curve, and sometimes that’s critical in hyper-growth mode. Now, again, the balance of that is if you need to bring in a new skill, kay, I’m gonna coach somebody here who hasn’t had the reps, versus somebody who, they’ve swung the bat a thousand times in that slow-pitch softball game. I know this person can hit. I know this person can get on base predictably. And so now you’re gonna say, ‘Okay, how much time am I gonna spend teaching somebody how to bat? How many times am I gonna teach somebody how to hit to the opposite field in slow-pitched softball?’ And again, that’s where the balance is.

And I’ve made that mistake before, where you think I can coach somebody to do something new, I can get them to do it. And then you look back and like, eh, I should’ve hired somebody who was an expert.

Harry: Can I ask why did it not work out there when you reveal that situation?

Fouad: Because sometimes it just takes too long for somebody to learn a new skill. The same way that there’s a learning curve for somebody to come into your organization and understand how the cultures work, understand how decisions are made. People come in here and they see decision journals and they’re like, ‘What the fuck is this?’ You know, they come in and they’re like, ‘What the fuck? I just want to make decisions, you know what I mean? I’m an expert! How dare you question?’ That’s kind of the reaction. ‘How dare you question my decision making framework.’ But, you know, I tell people, ‘Well, look, trust me. Let’s do a decision journal, you’re gonna like it over time.’ But again, all that stuff takes time.

When it hasn’t worked is when, you’re like, ‘Ugh, you know what? I don’t have time to invest that 2-3 months for someone to get to know how our organization works. I’m gonna just teach somebody how to do this skill.’ They just can’t do it, cause again, there’s a learning curve for everything.

It’s okay, again, goes back to experimentation and continuous improvement. Everybody makes mistakes. I tell this to my kids all the time. Everybody makes mistakes all the time. It’s okay, right? The question is whether you learned from it so you don’t make that same mistake again. That’s the lesson I’m telling a three year-old and a four year-old and a five year-old, but that lesson is apropos to me as a 41 year old.

Harry: No, I love that, and I couldn’t agree with you more there.

I do have to ask, we have Mariam Naficy at Minted on the show, and she very much agreed with you in terms of the coaching and promotion element. And she said that rotation of function is core to that internal up scaling. Would you agree with Mariam here, and what’ve you found to be incredibly useful and quite a utility value in terms of scaling learning curves for those internal employees?

Fouad: So, Mariam is super smart. I met her before, she came into Redpoint when I was at Redpoint. I think she’s friends with one of my MDs, Tim Haley over there. Obviously she gets to be on your podcast, she gets to be on Masters of Business. So she is a genius and I would say that she is 100% right in the context of her organization.

Again, this is kind of what I was talking about earlier with kind of generic advice. Every organization has its own context. Every person’s experience is different and so in my organization I believe in the power of compound learning, so trying to turn an SDR into a product person is not going to be the right move for my organization. But turning an SDR into a field sales person over time, which is something we’ve been able to do here, which is great. When I hire new employees, I say, ‘I’m here, you’re not gonna be working at Sapho in 10 years. Kay, you know. It’s such a low probability outcome for you to be working here. When you’re here, I want to develop you. I want you to get better, I want you to become a better professional. And if you can move up in my organization, great. If you can move up in another organization because I prepared you, fantastic.’ But I believe in compound skills. When you’re an inside sales person and you’re learning how to reach out, or cold-call or cold-email people, and get them to respond, that’s the basis of sales. How do I get to a customer? How do I get into a customer? How do I figure out what their problems are? How do I get them to say yes? So, I believe in compounding skills, but that’s my organization.

Now, Mariam Naficy’s a genius. So, here’s what I will say, she’s exactly right. Part of rotation as a function, a functions being courted through up scaling, parting of that is so that people in different silos can understand how the different silos work. And this kind of goes back to what we were talking earlier about, the holistic biology of an organization. The holistic biology of a startup. Understanding how marketing influences sales, understanding how product influences marketing. How all these different things come together and make the thing go? That’s where she’s exactly right, because as you grow people in an organization, they’re moving beyond that little piece of the puzzle that they solve, and they need to understand how more of the pieces work together or they won’t be able to do their job right.

Again, she’s much smarter than I am. She’s exactly right that people need to have more of a holistic view of the organization if they’re gonna rise in it. We just have different approaches, if that makes sense.

Harry: Absolutely. You said that about kind of working together, and I spoke to Ray, obviously, before the show, and he said you’ve done the most incredible job in developing the development team in Prague. I’d love to hear your thoughts now, that we really see the decentralization of engineering talent, what you think you’ve done to make it such a successful, segregated component of the business, and what you’d advise similar situations and founders looking to do the same.

Fouad: Well, you know, look, I think this is a real artifact of my co-founders’ genius. A lot of people want to build distributed organizations, but building a disrupted, functional organization that can scale is incredibly hard. When we started in Prague we were really lucky to find a great front-end developer that Peter had worked with in the past, and he had a partner whose an incredible back-end developer. And from that foundation of two we’ve grown to an office nearing sixty people. Doing that requires a couple things.

One is, if you think back to where we started, about frameworks, people need to understand where you’re going as an organization. They need to have a framework for understanding why they’re doing the things that they’re doing, and how it feeds into the larger goals of the organization. Especially when you’ve got a product and engineering organization there that isn’t necessarily talking to the customers. They need to be able to have the big picture. They need to understand what’re the cultural touchstones of the organization.

Every single employee, whether they’re in Prague, whether they’re in Romania, whether they’re distributed across the US, whether they’re in our headquarters here in San Bruno, on their first day of work they get a welcome box. The welcome box, of course, has a Sapho T-shirt and a Sapho hoodie, but it also has a copy of the greatest science fiction novel of all time, Dune, a copy of the DVD of Dune, and it has my Welcome to Sapho manifesto. And this is a manifesto that I wrote almost five years ago, around why we’re doing what we’re doing. And in it I lay out the cultural touchstones of, hey, this is what we’re gonna be about at Sapho. I call it C-3PO. It’s about customer obsession, it’s about curiosity, it’s about craftsmanship, it’s about being proactive, and it’s about being and acting like an owner.

And so every person in the organization reads this document when they come to the organization. Every time we have an all-hands we give out awards for people who best exemplify the different pieces of C-3PO. It becomes core to what we do here. So everyone has a common vision. Everyone knows where we’re headed. Everyone knows, here’s what we expect from our culture.

Now, here’s the difference. An office in Prague is going to hae its own local culture, and we are not going to have people in Prague living in an office environment that’s the same as the one we have here in San Bruno. And that takes a little bit of maturity, that takes a little bit of understanding, to understand that they’re going to have their own local ecosystem that’s going to look and feel different than our local ecosystem, right? Cause we have primarily sales and marketing and exec here, they have primarily product and engineering there. So, it’s gonna be different functions of an organization, you’ve got to be mature enough to say, ‘Yeah, we’re gonna let them have a local culture.’ But they know, here’s the framework for making decisions. They know, here’s our base expectation that everyone at the organization is gonna have. And, by the way, it takes a lot of face-time, okay. I think a lot of people overvalue, oh, I can do everything on a Google Hangout, or I can do everything on a Zoom and that’s how I’m gonna manage my remote teams. That’s not how we think about things at Sapho.

My cofounder Peter, he has been to Prague 20 times in the last four years. He goes there every four to three months. I go to Prague three or four times a year, every year. We have other execs from our office here, in Prague. We have people from Prague come here. So, when we had our sales kickoff for fiscal year 2019 back in January, the product leadership from Prague flew out here so that they could be part of it. It takes energy, it takes effort to make these distributed things work, but it’s been such a competitive advantage for us. We’ve been able to bring in elite engineering and product talent at a pace that would’ve been really hard to do if we just said, ‘You know what, we’re limited to the Bay area.’ But again, to do that you’ve got to be disciplined enough to put a framework in place, to align everybody and make sure we’re all rowing in the same direction.

Harry: You said that a couple of times, the word ‘maturity.’ We’ve spoken before about the power of being old. I mean, how could I not touch on this?

So, tell me Fouad, why is being old incredibly useful as your company scales?

Fouad: I always tell people that I’m an old fart and that I’ve got four toddlers and I coach 8-U boys soccer team. It’s definitely not cool and hip and young. I would say there’s two primary advantages to being old, as it pertains to scaling a company. And the first is experience. I’ve been grinding through this game for over 20 years, at all kinds of levels. At the entry level, at the C level, again, for decades. And I’ve seen, when I was a VC at Redpoint Ventures, and I have made, personally, many, many, many mistakes. And experience is valuable, because you see all these things, and scaling a business is tricky. There are so many landmines, there’s so many potholes that can derail your business right as it’s about to take off. We’ve talked about a couple of them, right? Founders not being willing to delegate, hiring empty suits at your organization, waiting too long to put processes in place.

I’m really lucky I have a board member, and, you know, he’s my mentor, Bill Coleman. Bill Coleman literally has seen everything there is to see in enterprise software. He was the head of product at VisiCalc, he was the president of Sun Micro systems. He was the founder and CEO of BEA systems, the fastest enterprise software company to get to a billion dollars of revenue. And he talks often about how every company needs to go through this cycle of validating their business, calibrating their business, scaling their business. How lucky am I to have this guy telling me where to avoid problems?

Tom Nichols wrote this awesome book a couple years ago called The Death of Expertise, where he talks about this general movement away from people accepting expertise. Somehow we’re starting to move away from that in Silicon Valley, where I literally have to answer questions like, ‘Oh, how is being old an advantage?’ Well, easy. You just see more over 20 years than you do if you’ve only been in the workplace for two years. And there’s a second advantage to that, which, again, having a bunch of kids and dealing with some of the other aspects of life, I have a natural advantage when it comes to hiring a broad spectrum of people, right? Not just brilliant young people, who we can get because we’ve got an awesome mission and we’ve got an awesome product and we’re deployed at the biggest companies in the world. There’s not a lot of companies that get to say, ‘Yeah, I’m at 15% of the Fortune 50 already as a young, four year-old company.’ But I also get to go get seasoned people with families. I understand their life in a way that a 23 year-old genius engineer just doesn’t. I understand the headaches, I understand the other variables that are impacting their lives, and when you can be empathetic to that experience, I just think it gives you an advantage.

We’ve been talking this whole time, people are the key. So if I can get the best people and I can delegate to them, that’s gonna be the key to me winning.

Harry: Can I play devil’s advocate here-

Fouad: 100%.

Harry: Naturally I’m maybe on the younger side of the argument. So I’m gonna play devil’s advocate on taking that first one. In terms of the landscape that we now live in, 20 years ago there was no such thing as the iPhone, there was no such thing as AWS, there was no such thing as bottom up. The landscape that we now scale business and stay is so fundamentally different. Does that not reduce the importance of experience when it comes to a lot of scaling structures? Not people management, that remains the same, but a lot of scaling structures?

Fouad: Well, you know, I think again, going back to this theme of super generic advice. If you’re talking about a consumer application where I just need to go and scale across a social network to get users, maybe you’re right. If you’re talking about a SaaS business that’s going to not target large enterprise and is going to top out at 20 million of ARR, maybe that’s the case. If you think you’re going to go and sell into the CIO at Johnson & Johnson, or Fanny Mae, and have a 26 year-old person who has no context for what it means to navigate a giant 200,000 person organization, and convince them to let you deploy software that’s gonna touch their mission critical, HR data, or ERP data, you’re just not being realistic. That’s just, again, maybe this is kind of an experience thing, that’s just not how the world works.

And so, again I think context matters. To the discussion that we’re having, experience matters to me. In the world that I live in, selling to Fortune 1000, Global Fortune 500, I need experienced people that understand how to navigate an organization. I need engineers that understand what it means to build mission critical software that gets deployed in a data center. We started off by talking about how we’re not kind of a SaaS company, we deploy in the data center on premises or in a virtual private cloud, but I can’t just do a hot patch on my live SaaS product to solve a bug. My software gets deployed into a data center, I’m not gonna be able to touch it until they upgrade their software, maybe once a quarter or once a month.

So, the type of engineering that that requires is much more structured, much more disciplined. The kind of product and marketing that you’ve got to do to kind of get to those types of people is much more structured, much more disciplined. The type of selling that you’re gonna do to that organization is gonna be much more structured, much more disciplined. So, context matters. I’m building an app that gets an on-demand person to tie my shoelaces? Yes, you’re right, no experience required, everybody can do it, go build incredible code and read all these blogs about how to do user acquisition on ad networks. You’re trying to go and change the way people work at the biggest companies in the world that employ a majority of people around the world? It’s just gonna require a different level of experience, and that’s okay.

Harry: Absolutely. Can I also just emphasize I do absolutely value the experience. I am very lucky to have many incredible mentors where I do hopefully gain some of their experience and learn from it.

Harry: I do have one final question before the quick fire that kind of touches on both the younger and the older element, and its a big question for a lot of SaaS founders and founders more generally, which is, how do you know when to hire the Jack-of-all-trades versus much more senior execs who’ve been there and done it? What’s your framework for thinking about this?

Fouad: It’s a great question, and you know, again I was lucky to be a venture capitalist for a while and see this a lot. I’ve been lucky to start four venture backed companies myself and see it in action, you know, hands on. And what I would say is this: The Jack-of-all-trades works until you have real, functional heads. At that point, the Jack-of-all-trades becomes disruptive. So, when you have a person whose job it is to run marketing and demand generation, and you have a person whose job it is to run product, and you have a person whose job it is to run the go-to market and sales strategy. All of a sudden, the Jack-of-all trades, who do they report to? Whose setting their north start? It becomes really hard for that person, and that’s where, going back to what we were talking about, coaching, they’ve got to specialize or they will be disruptive to the organization.

And so, and by the way, I love that part. I love when you’ve got raw talent and you’ve got to do work, you’ve got a person that gets shit done, you get to say, ‘Hey, what’s the favorite part of your job? Do you like the operational piece? Do you like the creative piece? Well let’s figure out which one, and then let’s have you kind of specializing down that pathway.’ Because that’s how you really get the compounding value of experience, the compounding value of learning. And I’m always excited when somebody’s ready to kind of make that leap.

At the beginning of a company, when you have 10 people, yeah, I mean. By the way, even today, I’m sitting there and I’m filling the fridge at the office, I’m sweeping the floors after a party, I’m hiring people. There’s always going to be some element where you’ve got to do a little bit more than your job description if you really want a company to work, but I would say when you have real functional heads, Jack-of-all-trades really become disruptive and you’re not being fair to them if you don’t help them specialize.

Harry: Yeah, absolutely. Speaking of specializing, I want to finish today on a full-on 60 second SaaStr. So I say a short statement, and then you give me your immediate thoughts, about 60 seconds or less. How does that sound?

Fouad: Okay, 60 seconds, this will be like Family Feud.

Harry: See, this one’s off schedule, but I can’t not ask it. What would you most like to change about Silicon Valley and startups today?

Fouad: I will take it from the enterprise perspective, cause that’s what I spend a lot of my time one. I would love us to move beyond viewing SaaS as the second coming of Christ and see it for what it is: a new delivery mechanism for software and a new billing model. Because I think the second we do that as a community, we can move onto the next step in enterprise software, which is actually changing how people work. That’s the thing that’s most exciting to me about Silicon Valley. We have a chance to go in and really change how people work. And, again, just putting their old PeopleSoft in a browser and saying, ‘We’ve done it!’ To me is not where we can get to. We can do better. And so, I think we’re almost getting there, but that’s where I’d love things to go in the near future.

Harry: Now, when I emailed you over the weekend, I ruined your inbox zero. What’re your tips, secrets, and practices to really achieving this?

Fouad: The reason I even tweeted out inbox zero, by the way, is because it’s so rare for me to get there. So let me put that out as a kind of preamble before I tell you what I do. I am an obsessive Trello user. I have many, many Trello boards that I use to manage my work and manage my personal life, and I’m really disciplined about doing it. So, I will structure my Trello boards with here’s what needs to get done today, here’s what needs to get done this week, here’s what needs to get done this month, here’s what needs to get done this quarter. And then in side each of the cards I will structure it and color-code it, on hey, here’s something that’s high priority, that is a short project, a medium project, or a long project, here’s something that’s lower priority, and I’ll move my cards around every day. What that allows me to do is really say, okay, I have kind of this meta-view of here’s the things that Fouad needs to get done, and now I can structure my day in the morning or the night before and say, ‘Okay, I will be successful when I get these things done. If I have extra time, now I can go pull other things into it.’

Fouad: And that kind of discipline is something that I’ve been really lucky to show other people at Sapho. And, people are like, ‘Well, how do I structure my life? How do I get more disciplined? How do I get more stuff done?’ You know, it kind of goes back to the theme that you’ve heard me repeating here: framework for making decisions. If you structure your life and you structure the way you’re gonna make decisions, you can be more productive, but Trello has been a lifesaver for me.

Harry: Tell me a moment in your business life that’s really changed the way you think.

Fouad: I would say, when I was at CBS, you’re at a 30-thousand person organization, I was the chief strategy officer of the digital group, we’re doing a digital transformation. But, you kind of look at my career, it’s the first really large company that I’d ever worked at. I will tell you this, until you actually work at a big company and see how decisions are made, how things get done, you can’t really understand how the whole thing works. I love models, I love frameworks, I love thinking about the biology of the system, and I love books like scale. I’m sure somebody has talked about that on your podcast before, but actually being in there and seeing how everything works, and again, I’m lucky because I was at a C level and could see these things. It’s amazing to understand how actual decisions get made, and it gives you a great framework. As a startup, hey, here’s how I can actually get things done. Here’s how I can actually change things at these big organizations.

And kind of back to our conversation about experience, if you were two years out of school and you started out at a startup with 10 people and now you’re at a startup with 15 people, it’s hard for me to imagine that you would have the context for how things work at these big companies. It’s really easy to talk about, ‘I’m gonna disrupt everything!’ When you don’t actually see how these things that do billions and billions of dollars of revenue actually work.

And so, I’m so lucky that they bought one of our portfolio companies, CBS did, Clicker, and one of my mentors Jim Lanzone went over there to kind of run that digital transformation and asked me to come and help him, because it was really life changing for me. Like, really life changing.

Harry: And then I want to finish Fouad, on what do you know now that you wish you’d known at the beginning? And you can choose the beginning. It can be the beginning of Sapho, the first venture by a startup you did, but the beginning of dot, dot, dot.

Fouad: Well, I’m gonna go back to the beginning beginning. So, you know, I graduated from Dartmouth in a different millennia. It’s getting really scary now. This recent class of people, our new class of employees, out of the class of 2018 started two weeks ago, and I’m realizing that their birth year is getting really close to the year that I graduated from college.

Harry: When did you graduate from college?

Fouad: It was 1998.

Harry: That’s close.

Fouad: Exactly, exactly.

Harry: I was born in ’96.

Fouad: Bingo. Welcome to my life. I can’t make any references to 80’s television shows. People look at me like I’m a lunatic here when I talk about old movies. Old, like Top Gun.

Harry: I know Top Gun. Top Gun, Cocktail, my favorites.

Fouad: Oh yes, good, good. I like that you like, I argued with somebody about Tom Cruise and how awesome he was the other day.

Sorry, let me answer your question rather than going off on sad tangents about how old I am. Here’s something that I wish I had known at the very beginning, right, and it’s I’m not going to be the smartest guy in the room, and I need to listen more. I think if you look at the people that end up in Silicon Valley, the people that end up becoming venture capitalists, the people that end up starting these awesome companies that, sorry, even beyond Silicon Valley, the world. China. EU. Wherever startups are being born. Most of us have been the smartest guy in the room.

When you were growing up, you know, when you were in high school, when you were in college, you were probably the smartest guy in the rooms, and it takes a level of humility, right, and a level of maturity to accept, you know what, I’m not going to be the smartest guy in the room. And I need to listen more. And oh, by the way, the best thing that I can do as an entrepreneur, the best thing that I can do as an investor, the best thing that I can do as a manager, is to hire people that are smarter than me, because that’s how you move forward as an organization.

The line between winning and losing in startups is so, so thin. So thin. And if you let ego get in the way of making great decisions, if you let stupid bullshit get in the way of making great decisions, you’re gonna lose. Cause the line is that thin.

And so, humility, I think is something. You know, I’m from Philadelphia, and so when we talked about being kind of an inspirational asshole, I can tell you this: people from Philadelphia, we’re really good at the back half of the inspirational asshole. And so, again, being humble, having humility, listening, I think it is such a critical skill if you want to win, and it took me making lots and lots of mistakes. Still making mistakes, you know what I mean? There’s no perfect human being, there’s no God, emperor down here in Silicon Valley. Everybody’s learning, everyone’s trying to get better, and so I think that’s probably the thing that I wish, wish I could’ve gotten to there more quickly.

Harry: Well, Fouad, as I said, I heard just the most incredible things from both Ray and from Roy, so thank you so much for joining me today. And as you can tell, I absolutely loved it.

Fouad: Thank you for having me, and again, apologies to your listeners. I am who I am sometimes.

Harry: And we would not change who you are for the world, Fouad. It was such a pleasure to have Fouad on the show then. I think you can just tell how much I enjoyed having him on the show. Likewise, we’d love to see you behind the scenes here on SaaStr, on Instagram @hstebbings1996. You can now submit both guests and questions for future episodes. I’d absolutely love to see you there.

As always, I so appreciate all your support, and I cannot wait to bring you a phenomenal episode next week.

 

Published on August 17, 2018

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