Matthew: We know founders face unique challenges when they decide to launch and build a company. What’s been the hardest part about building New Relic and how have you overcome this obstacle?
Lew: Well, I think the org and the challenge to growing as a founder is understanding, first of all learning what to hold on to and what to let go as far as your role and responsibilities in the org. Understanding your strengths and weaknesses and complimenting yourself with team members who have those complimentary skills and that you can delegate to and trust.
So, that takes a lot of, especially for first time founders, there can be a lot of angst around that especially if you want your company to reach its full potential, and you’ve got to be able to recruit people that are way better at doing what they do than you could be and being comfortable letting them reach their potential. If you’re going to hire a superstar CFO or VP of marketing or VP on engineering, they’re not going to be attracted to your company or stay at your company if they’re doing only what you micro manage them to do on a daily basis.
Now, on the other end of the spectrum, if you just let them kind of do whatever they want without kind of being brought into a cohesive umbrella of here’s where the whole org is going, then you’re going to have a lot of organizational challenges, so you can’t just sort of walk away and say, “All right, I’ve hired these stars and you guys figure out how to do it and just don’t bother me too often.” So, you can’t go too far on the other end the spectrum and not provide that leadership that the team needs to sort of all be rowing in the same direction.
More often than not, I think founders struggle with the former, especially because only a founder can really have that emotional attachment to their company, it’s their baby and they’ve seen it from its birth, and so it’s very painful when the changes come along that are an inevitable part of growing your company. This was a lot harder for my first company than my second company, going through it for the first time. I’m sure we’re going to have similar challenges because we aspire to be a much larger company than Wiley was.
Our goal is to have the same kind of impact in the $3 billion application performance management market that a company like SalesForce has in its market, and we think we can do that. We aspire to be a very large independent public company, and that means that there’s going to be a lot of growing challenges as we go along. I’d say being comfortable with what your strengths are and what your weaknesses are and bringing in people that you can build that relationship of trust with so that they can reach their full potential is really the most important challenge any founder who aspires to build a great company has before them.
Matthew: Since you’ve been in operation, what have you learned about your business and your users that you didn’t realize?
Lew: That’s a really good question. What surprised us is how our low friction go-to market model that involves only inside sales, very low touch high volume is the way businesses prefer to purchase software. So, my first company, when it was acquired by CA, had about 270 employees. Only 15 of them wrote code for the software that the customer bought, but 150 people were in the field in the sales force and that includes sales, sales engineers, sales management people in about 10 countries around the world and consulting as well.
I’m impressed with how enterprises prefer to just have quick phone calls and emails rather than looking at PowerPoint to determine whether or not the solution will work for them. Using the software, concluding on their own this will work for us and then just having a quick commercial discussion to make sure it makes business sense. So, it works well for everybody. They don’t have to wait for some guy to come flying in and take him out to a steak dinner when they’d rather be home with their family that night anyway and look at PowerPoint and then think about, how is this going to work when we don’t take six months to deploy it. They prefer to just use the software and through the SaaS model you can just use it right away.
We can far more scalably service the market with a small, highly talented team of inside sales people that have commercial discussions with the customers that are ready to have a commercial discussion. That allows us to have a lot lower prices, and it’s great that it’s something that’s better for the customer and better for us a vendor. It’s something that the reason why we think we can disrupt this market is the encumbrance in this market are addicted to their old and outdated go-to market models and they don’t think they’re able to change.
Matthew: Lots of people admire entrepreneurs because they appear to make starting companies look easy even though it can be very difficult, so we want to dispel some myths here. My question for you, Lew, is what talent or skills come intuitively or easily for you? What has been specifically difficult and how have you managed that?
Lew: I think that the things that have come easily for me, relatively speaking, is just a gut feel on people. When I meet people that my gut tells me whether or not someone’s a good cultural fit for this company and that’s so important when you’re hiring, it’s far more important than whatever’s at the top of the resume. Is this the kind of person you can build a relationship with that you respect as a human being and you can imagine spending time with outside of work and you can enjoy coming to work with every day? Because if you’ve got that relationship with the people you work with and trust comes out of that, when people feel trusted, they are so much more productive. You get so much more individual and organizational productivity and excellence.
So, I think I’ve had a good track record on going with my gut on people, and that’s really served the companies well that I’ve been a part of. The hard part though that I’ve worked on and I’m trying to get better at is being such a nice guy that I was being actually conflict [inaudible 06:31]]. So, just bringing in a bunch of really talented people in the org and then where there was a disagreement in the past, as a first time manager, I would either try too hard to build consensus or perhaps just pretend that they weren’t real issues worth taking head on and then they’d become real issues over time.
So, recognizing the importance of heading off potential conflict issues early, lining up the organization around decisions that people may not agree on, that’s not what I naturally do, it’s not what I was born to do well, but I’m understanding that if you don’t do that well your company will suffer. It’s something that I’ve learned over time.
Matthew: What’s the most important lesson you’ve learned building New Relic?
Lew: Well, I think one thing that any founder ought to pay attention to is how important it is to have a high quality transparent relationship with your investors, and I’m of the opinion that great venture investors make or break companies and it’s not the brand on the wall, although it is true that a lot of the best venture investors are at the recognizable names. It’s so important, I was talking about trust with your employees and your VP team if you’re the CEO, for example, but that really filters down. Does the CEO have a trusting and open relationship with his board?
Let me give you an example. If I’ve got a board dynamic where I want to share a certain set of numbers internally with the company and then share a more conservative set of numbers with my board because I don’t want to ever look bad to them, and then I tell my VPs, OK, you’d better not share the real numbers with them because we just want to look like we know what we’re doing. They can sense that and then they start to discount, they can sense that you’re hiding things, you’re not being transparent with them and then they discount what you have to say, and then they start pushing back on you in a harder way and a less collaborative way.
Contrast that with, our board meetings at New Relic are actually very… They have great structure, and it’s not that we just walk in not knowing what we’re doing, but they’re collaborative and open and people feel very empowered to ask pretty open questions and not worrying about looking “dumb”. I believe that if you’ve got that healthy dynamic, if I have that dynamic with my board as a founder, then my VPs are less likely to hide things from me, and their directors are less likely to hide things from them.
It’s that good or bad vibe at the board level will filter all the way down to the individual contributor level in the company. So, if you’re lucky enough to get term sheets from investors, just as important as the terms or evaluation are the person that you would be working with and whether you feel like you’d be comfortable taking bad news to them as well as good.
Matthew: What bit of advice do you wish you would have known before starting New Relic?
Lew: I’d say in both New Relic and Wiley as a founder there’s so many times where you feel like the weight of the free world rests on this one decision, this one thing today, and you beat yourself to shreds if you’re not perfect as you expect yourself to be in your role. At the end of the day, you have to bring your A game to your job, but you’ve got to do a good job of sorting out the critical strategic issues that you need to focus on and the things that you can afford to delegate or you can…certainly not, if you lose sleep over every little thing going on in your company. You’re going to burn yourself out, and it’s not only going to affect you, but it’s going to affect your company because you bring that lack of energy to work every day, that starts to bleed into the whole organization.
So, figure out what are the key things that are worth losing sleep about in your company and it usually has to do with your people and whether they’re motivated and whether they’re in the right market where you’ve got a product that services your customer’s needs, whether they’re happy with it and whether you like your business model. Whether or not, what color the new kitchen’s going to be in your new office space and stressing out over you’re not getting back on that email. It’s very easy to get caught up in the details when it’s your baby.
That’s the kind of thing that can really wear you out, and founders need to prepare themselves to be on a marathon. I’m of the mind, anyway, that this isn’t worth doing if you’re building a company just to flip. I want to be, the companies I want to be involved in have to be built with an intent to have a long-term impact.
Now, the reality of the world is that companies get bought, but that can’t be the reason why you start the company. You’ve got to have an interest in making an impact for the long-term. That means you’ve got to love your job and you can’t burn yourself out on stuff that just isn’t worth it. Then, there’s some things that we’ve learned on the consumers side as well, but for us it’s all about, what is the experience for the first 90 seconds with your product? It’s not who’s going to blog about it or what press you might get.
Those are all important, and we try to make sure there’s awareness in what we do but at the end of the day, people are so busy, they’ve got so little time to try something new that you’ve got a very limited amount of time to wow them. Just imagine, I’m just watching X-Factor this week and you’ve got these people have got 15 seconds to wow Simon, and if they don’t wow Simon in 15 seconds they’re gone. That’s the way you’ve got to think about how your product impacts these very busy people that just don’t have time to be patient with, well if you give us an hour we’ll really explain to you why this thing will make your life better.
I think for business software companies, they’re kind of used to that. They’re kind of used to, well let me send a person on site with you to put up a PowerPoint and tell you why you should spend millions of dollars and a year deploying this great software. For us, we’re turning that on its head and saying let’s learn from consumer companies and say, now when we launch we’re going to launch with something that wows the customer in the first 90 seconds.
Matthew: Lew, before we close, we would love for you to give our audience your vision for New Relic and how you hope it will continue to change the world.
Lew: Well, I’m particularly excited because, while there’s obviously a lot of folks know what’s going on on the consumer side, there’s more than a hundred billions of IT spending that’s spent on hard to use, complex software that isn’t right for disruption, and it’s all going to change for the better for these businesses. So, if you look at what’s on the screens of corporate desktops, the software they have to use every day is like, these people; sometimes you want a root canal rather than use this kind of software. So, I believe that there are going to be a handful of companies that emerge in the next five years that could reach billions in sales and in the process make software a joy to use just as products have become just remarkable fun and easy to use on the consumers side.
We’re going to see some very interesting businesses come along that’s just going to disrupt how IT works. I think New Relic is one of those companies or it has the potential to be one of those companies. That $3 billion application performance management segment I talked about is part of more than $20 billion IT management marketplace that’s dominated by four companies that have a direct heavyweight sales model and only service deals that are worth half a million or more in upfront license cost.
I think of that as kind of like satellite phones in the 80s. A handful of people could spend $2,000 or $3,000 on this big clunky, ugly phone, and then we look at where we are today where the whole world has access to smart phones that are small, sleek and a small fraction of cost and that’s where the big opportunity is. So, we want to bring to enterprise IT the kind of change that cell phones brought into a space that was dominated by satellite phones 20 years ago.
Matthew: Lew, it’s been a pleasure having you as a guest on Founderly. We’re rooting forward to your continued success at New Relic. For those of you in our audience who’d like to learn more and use their product, you can visit their website at www.newrelic.com.
This is Matthew Wise at FounderLY. Thanks so much, Lew.
Lew: Thank you.