From Burn-Out to $100M in ARR with Jason Cohen, Founder of WP Engine

please welcome Jason Cohen CTO and co-founder of WP engine oh my goodness look at that this is not a presentation this is a sermon and we're gonna take as our object of study a passage from the book of hacker news this this post was put on hacker news about him a couple months ago anonymously it's titled I don't want to be a founder anymore I'm using a throwaway account because there's a lot to lose from speaking how I feel I found that a company several years ago fast forward to today and we're profitable growing steadily debt-free and are about to be acquired the problem is I'm supremely unhappy each morning my first thought has been what if I didn't work here I explore what it would be like to work at Walmart it seems so stress-free then my phone starts ringing and I'm snap back to reality this morning I locked myself in the bathroom with the shower running so my wife wouldn't hear and cried my eyes out so from my possibly skewed point of view I have two two options I can quit which effectively kills any acquisition and the company as well I can suck it up and work on the same thing for two to five more years I've been mulling over a third option which is to hire someone to do my day-to-day but I don't know how to make it work the product is too complicated for someone to come in and take over and it just isn't that interesting it's just a glorified crud app and it's been hard to retain developers is it common for a founder to go through this train of thought before an acquisition is there a trick to convince yourself you want to keep doing this maybe I'm depressed and need drugs signed a founder in pain so let's answer this question is it common so there was a study by Columbia Business School of 22 entrepreneurs who also exit their businesses and made 10 million or more personally from its in other words success 21 out of the 22 were depressed after having that success it's not just common its what always happens so this is hahaha except all of you are gonna be like this except 1 out of 22 and that's not OK this is Markus Persson he founded minecraft he sold to Microsoft and made hundreds of millions of dollars I don't know how much more successful you can get and he almost committed suicide and did it on Twitter it's not funny right they all hate me and this is success maybe he shouldn't have sold the game no even though he's about to do that best thing I ever did to sell minecraft what are we supposed to do with this so that's of course we're gonna talk about is there a trick nope of course not but let's start exploring what's going on how did they get here how did all of us get here well it's not intentional we didn't intend to do that it's frog boiling in water that means it's happening right now it's unfolding right now for you unintentionally and so the right question is what should you be doing differently now in order to prevent this in order to build a company that's more healthy and prosperous of course and also avoid this balloon payment of emotional toil at the end and so the thesis that I'm gonna talk about today is I think you have to make emotionally difficult choices and I'll be very specific all along the way to build a healthier company and to make you also maybe avoid this fate which kind of puts in question while we're all doing this at all I did this wrong in my previous startups I've sold companies for millions of dollars and our current startup which we are now at a hundred million in ARR which is always the magical sastra number so in other words and I'm still here after eight years and not upset so you see I've done it wrong and right so hopefully this will be useful to you too so let me zoom in on this part the product is complex and boring too so the product is now these sound like good reasons but they're not the real reasons I can't I can't get someone to help because the product is too complex really because I know a lot of developers who work on really come like stuff that sounds like a good reason why it's too hard to get help but that's not true is it but it does sound like someone who's very self-important it's so complex only I could possibly understand maybe that's more of the real problem and also the product is boring okay so that's so complex no one can figure it out but you and also it's so boring no one wants to work on it and that's why you can't retain developers probably not so I want to prove that you are making exactly this error now the same error that this guy's making so raise your hand if you have ever fired someone too late taking too much time and finally dead so that's most hands okay now raise your hand if you've ever fight or anybody too soon one two three okay so about 1/100 think the pattern is clear this is very predictable we all we make this failure of judgment all the time we all do it we're all guilty but what's going on same thing there's good reasons not to fire someone you know that team you know before I get some a replacement in that team it's too hard for the two that team to continue I need a weight that sounds like a good reason that's the excuses we tell ourselves why we're not doing it right we all know that's not true we've all been on teams with someone that shouldn't be on the team it'd be much better if they were just gone rather than the team having to make up for them clean up after them right it's not the real reason another reason we tell ourselves especially as new founders is I'm a bad manager I haven't said expectations it's not their fault it's probably mine I need to set better expectations to give more time we say sounds like a good reason except what about the other seven people on the team that are thriving you probably are a terrible manager that's probably true but we need to we need to operate now and everyone else is operating now we don't have time for this actually so even if that's true it doesn't mean that person is a bad person or something like this it's just they're not a fit here now that's the truth so these the only good reasons but they're not the real reason is simple it's scary you are scared can you accept that you just accept you're scared and that's why you're not doing and that's the whole argument and it's not a good very good argument of course and of course it's scary it's a hard conversation to have what if they cry what if you cry what if they get upset and do something what if other employees get upset and do stuff what if they get violent you have to take out a restraining order I've had to do that what if they get depressed afterwards and killed themselves and you have to explain to everybody that has happened to me there's a reason to be scared about it it is scary it is scary okay fine also you got to do it that's the truth making the emotionally difficult choice is better so what are what are what's a more general framework for thinking about these kinds of things not just this well there's things you want to do and things you don't want to do things that need to be done in the business and things that don't really need to be done of course and the problem is you you do the things you want to do and you're the founder of the CEO or whatever and so you don't have a boss telling you you can't and we just established you're a shitty boss too so this is a problem no one's stopping you from doing this stuff that's a say doesn't really need to be done but you know you can it's very tempting but it's a failure mode because you're not spending their time of the things you should be doing like maybe working on sales or dealing with a difficult person you should be doing the stuff on the right so how do you know you're in this bottom right position where you're delaying something that needs to be done and you need to fix it quickly how do you know that and the one way that I know is you can't stop thinking about it when you wake up at 2:00 in the morning you're like oh no ha like that that simple thing not a deep analysis just that simple thing if I can't stop thinking about how this person's here and they shouldn't be that indicates you do need to take action why because when when there's an emotionally difficult choice like having to fire somebody and one that's not as difficult and you can't decide you can't decide only because you don't want to otherwise it would be no question if if the easy one was clearly the better one you wouldn't be stuck the reason you're stuck is that you have to make the hard choice so that's how you do it and then how do you do things that are difficult how do you do it well do it quickly delaying only hurts everybody everybody you the team the person be decisive our CEO Heather Bruner has a terrific phrase about this which is General Patton on the decision mother Teresa on the exit be decisive and then be kind that's the right way to do it okay let's dig into another part of our object of study here if I quit I kill the company and the acquisition Wow you must be so important that's what that person's thinking right except what's really happened is the person has built a brittle organization one where if anything happens to the founder the whole thing is going to melt I guess and imagine a stress that that puts on that person I guess this person has not hired anyone who can actually run the company and run their functions so that it's not true or maybe the person has and aren't allowing allowing to do that either way it's a failure right so let's dig into this too because you do this kind of thing too and I'm going to show you so this is the obvious fallacy we all know this this is the smartest person in the room so that's wrong so so Steve Jobs actually was the one who did this thing that we all also know a players hire we all know this and you can tell apples full of eight players because just look at them or maybe that's kiss without their makeup I'm not sure anyway so this is what we think we're doing but we're not let me show you here's why you actually don't hire eight players you ask a Mayan eight player so let's say you're an engineer and you say I know how to hire engineers and you do you know how to interview and manage them later and so you hire other a player engineers and product people or whatever okay good and then of course there's the majority of things that happen in the business that whoever you are you're not an a player about so what do we do we say okay we got to learn at we got to do AdWords for sure I don't know AdWords so I'll do it I the founder I will figure it out I'll spin up some months and figure it out then I'll know the lingo and I'll know what's important and all these kind of things and then I'll be able to hire that a player because I'll know what to ask them what to do and how to manage that person that's what we all think and this is the fallacy the idea that you can become an expert in something important something that's an entire career for someone else in a few months and then hiring a player that's of course not true so you're actually a C player at best and then of course you're gonna hire only the things that you know after part-time couple of months of work on it which is bad and so you end up building this organization where some people are a players but most aren't and then guess what those functions don't work very well because you haven't hired very well and so you're like screw that will decide more engineers and engineers can just like magically do marketing and sales and stuff like right that's it so what the engineer say this is why so Steve Jobs also said I hate quoting Steve Jobs really cuz everyone does at least I'm not quoting musk no muss quotes anyway so you hire smart people and so that they tell you what to do they blow you up so how that's weird cuz Steve Jobs is the one who tells everyone what to do right but know what jobs did is he hired the best designers in the world and then held them to a very high standard which is what an editor does not a writer not a maker and editor and he wasn't the best technologist but he had great technologists or mostly if you remember the old Mac OS stuff they misspelled the word dispose sometimes I think they were high anyway be an editor he hired the best CEO oh the best operating officer in Tim Cook that there is and hold him to a higher standard that's actually what he did so that's part of the trick is to is to do that so here's how you do this here's how you hire people who are better than you and know more than you about a thing and then manage them that's weird and yet that is the definition of how to build a great organization so the first thing is when you're in the interview process you're looking for someone who's enlightening you in other words you feel like you're learning a lot just by being in here and you come away thinking man even we don't hire this person we need to do like half the things that you said that's how it should feel Zuckerberg said another person to quote it all the time Zuckerberg said hire someone that you feel like in if the circumstances were a little different you would work for that person but the second thing I think is more interesting which is results orientation and here's what I mean there's action oriented people and results or any people let's say I'm hiring an event planner here's what an action-oriented event planner says when you ask tell me about the last great event that you put on they say oh man we had these great curtains with up lights that look really cool and the food was really good I was able to get a deal on the shrimp and everyone said the shrimp was good and you know people seem to really like it action oriented talking about stuff that you did it's probably good stuff here's a results-oriented answer well the goal is to have 150 people come we had 200 reservations and actually 168 came which we were super proud about now we weren't actually sure how many seal sleeves we got but we got 12 leads to have already closed two more look pretty good I'm not sure about the rest anyway was successful enough that we've decided to put on three more of these next year and do them in different countries and see how that goes results-oriented now why do you need a higher results-oriented people in order to solve for this problem of management it's because you that by definition you'd can't tell them how to do their job by definition you don't know how to put on a great event so you can't you have you can't tell them or manage what they're doing you have to manage the results of it and hold them to that bar so by hiring for people who are already think that way already like to be measured by the results that they make instead of what they do then that's how you're gonna manage them and that's all gonna be nice because that's how the person already likes to operate so you hold accountable to results and edit also this is the right way any way to manage everybody including the folks that you you are expert in that stuff why well like taking the engineering example if the fun part about engineering is inventing something new and architecting it and then all the labor is improving that you're right and bug fixing bugs and stuff that's the whole that's the annoying part so if you're the architect and everybody else has to do scut work you're taken away the only fun part that stinks that's bad so I think this is the right way to manage everybody period regardless of how so if you can agree that the best thing is to have everyone in the organization be better than you then you can create a resilient organization where instead of feeling like this person crushed the only person that can do everything it's just the reverse should feel like the people in the organization are booing you up that they're doing a lot of the work that they're inventing things you wouldn't even have thought of that's what a strong organization looks like and that's part of what prevents not only the mental health problems but also is a stronger organization almost by definition right so this is some tricks but I want to talk about this this thing about success and kind of dwell on that for a bit I want to go back to this because he said I have two options and then he lists three options this really should be a fourth option which is just don't do any of that just keep running the company but that's not really an option for this person they're obviously so upset and sad that even that's not an option they're stuck they have they really have zero options so we got to figure this out so maybe you shouldn't sell maybe that's the answer and you had this phrase you sold your baby is that true is that what it's like well there was a study where they put founders in MRI machines so that's mapping the brain and seeing what the brain is doing then they shown these neutral noting pictures like landscape and the brains just sitting there in neutral and then they show those folks pictures of their own kids that's my daughter and of course the brains like right my kids good bad everything right just stuff so then they go back to the landscapes and the your brain goes back to neutral and then they show pictures of the founders logo brain goes right back into kid mode same pattern it is a baby it actually is so it makes sense why this is kind of a I don't know emotional stressful whatever same thing nevertheless it's not true that you should just never sell just like just like Marcus here it's not true it's not true for me either so this is my previous company smart bear and it was sold just last year to Frisco Partners for 450 million dollars that's awesome except that I sold it to insight partners in 2007 so why did everyone laughing clap that's no you're just to go oh so maybe I shouldn't have sold except this this trajectory wasn't happening when I was the CEO was it it was this that was the trajectory were on so that's not necessarily good plus I was burnt out I'll tell you this story so I was um so I got this offer from insight which was good just financially speaking multiple on this and that it was good so I come home and tell my wife oh I don't know what to do like we're profitable growing everything's good also this offer is actually good I don't know what to do and my wife goes will you have to sell I said I why do I have to she says well don't you realize how unhappy you are no I didn't I had gotten in that place but I didn't I fixed this in wpengine but it doesn't Pynchon longer and I didn't have this problem by the way had I stay there's another option which is maybe it did you know this is look at the time frame here this is a 7 this is a 15 year time frame the software companies don't necessarily last that long there were other people in our same space that were also bootstrapped and profitable and and that the green curve is what happened to them it's not true that I should have stayed having left I got to be a stay-at-home dad because that's when I left actually in 2009 when my wife was pregnant I was a stayed on that for a year and I wouldn't give that back for anything and then I found a WP engine in 2010 and like I said we now we've passed 100 million annual revenue we just got a 250 million dollar investment from Silver Lake and we're worth more than SmartBear right now I'm not saying that's always how it happens of course not oh thank you that's not always how it happens the point is it's not true in retrospect that it's you should never sell not true so here's the issue startups always change always or do you change even though you think you won't maybe it goes well and your job changes and as the CEO it's a very different job at a hundred or we're now at five hundred people it's a very different job at these breakpoints and it was early maybe you'll be unhappy there okay maybe you give up the CEO position but then you're not in control maybe that doesn't make you happy or maybe the start the serval goes sideways and just get bored after ten years or maybe it craters of course and fails like it's going to change that's the deal and it's hard that's the deal so you have to build it in so here's how I've been successful this time around so this is our CEO Heather Bruner and me winning the entrepreneur of the Year award from E&Y actually last year in Austin and Heather joined our company four years after it was founded and yet we're both winning the Entrepreneur Award together is that weird someone joining that late gets to be Entrepreneur Award winner if you're thinking that way then you're not paying any attention yes of course though you're so blessed and awesome as a founder that no one could possibly impact the business as much as you well then you're not hiring impactful people and that's your problem Heather is amazing and as our CEO a lot of the success we have today is due directly directly to the things Heather did and building the executive team and the strategy and so on and so on all the things that are necessary and that wouldn't have happened if I was a CEO I know because I'd done it before I thought that you're dead great right our executive team is majority female for example we have diversity in many areas in the business half of our engineering management are women for example so we by asking what are all the people that could bring power to the business and getting those people in whether you're the founder and CEO or anybody else that is how we got strong and that explains our success I'm going to give you this story because this helped me emotionally get over this moment cuz a lot of people ask well what was it like to decide to not be the CEO anymore because of course that's a big decision in sometimes it goes wrong I mean there's a lot of things around that right so it's not it of course it's not always true that you you should just replace yourself that's not true but this this was useful to me emotionally so I'm gonna tell you the story in case it's helpful to you as well so I was at this bar in Austin and talking to one of our board members and kind of getting through that like intellectually I knew I shouldn't be the CEO we had about 80 people and I was like I'm not a good CEO at 80 people that's that's not my sweet spot but emotionally you know it's hard of course it's your baby and all that of course it's harder that's okay and so he says Jason I know I know what you're thinking I said what he says uh you want the credit I said what do you mean he goes cuz someday like what if you ring the bell on the Nasdaq like you want the credit and you know it's the whole team effort did it up but you want the credit and I said you're right like a shallow and what end selfish as that is I guess you're true I do I mean I think founders generally do and he says here's the founder you'll always get the credit I know that's it's so obvious in retrospect right this is not a deep observation but I just needed to hear that right the him so maybe in the hopes that maybe you need to hear that yeah you always get the credit you don't have to hold on to these things like CEO or see whatever or blah blah blah for ego because you'll still get the credit your egos going to be fine you're gonna get the ego stuff anyway which is cool it's not it's not a bad thing to want to start the ego I wanted so big oh of course but you can still do that okay so here's the framework that I used to make this decision and I encourage everybody at wpengine for evermore to use this framework to figure out what should I do and what should my career be and all this so I show it show it to you too and you've seen some of this kind of stuff before I bet but but maybe hopefully there's different context now that you can that you can evaluate it in so of course there's things you like to do and things that you're good at Venn diagrams you know what's coming and so this stuff I know this stuff is learning right you're not good at it but you like it learn it's good you should do some of that at school and then this is toil like stuff you're good at it so you do it but you don't enjoy it like maybe accounting or whatever and then this is the sweet spot where you're happy because you're good at it you're doing okay we all know about these things right so the next layer though is what does the company need again this is going to tie it together all the things that we have just talked about what does the company actually needs to do because these are various failure modes that we're in all the time and again I think if you address these modes the company will be stronger and you'll be healthier too so that flow is a trap that happy flow is a trap if that's not what the company needs you to be doing the typical example is the engineer who it implements the feature which of course you can do in two days and of course it'll be good and three customers will like it but actually what you need to do is double sales and then one features ain't gonna do it right it's not what the company needs so that's a trap that we've seen this is a trap too but the company needs it to be done and I like it well if it needs to be done it needs to be done well you've got a focus startups always are constrained by time even more than money so you have to focus so doing things that you like that the company needs is wrong because the company needs it and it's one of the few things that you really do need to focus on then it needs to be done well another failure mode is this which is burnout in other words the company needs it to be done I'm even good at it for real but I don't like it we always put ourselves in those positions as leaders and founders this crappy word servant leadership it leads to stuff like this this is the scut work that needs to be done and I can do it so I'll do it the team doesn't meet doesn't have to do it that sounds altruistic and what it does is burn you out because you're doing all the you don't like to do and what's the is that really the promise of entrepreneurship that you get to do all the stuff that you don't like doing like what the hell's the point of that it's true it needs to be done here even good at but we need to need to do of course is find someone who also is good at it who likes it right because they'll be thrilled because that's fulfillment again you know that's coming you have to go in the center of the Venn diagram it's never like the bottom left corner is it someday that's what I'm gonna do and you want to be like in the bottom left anyway so of course that's the place and it's it's an idealization you can't be in there all the time blah blah blah I know but the more that you are in here that this is how you do it so that's what I did this is why I wasn't the CEO because what the company needed and what I liked not to mention what I was good at did not mix I like product and engineering so I went and became the CTO and did product and engineering for a couple years then the engineering team got to be a hundred people and I don't like managing people remember I may have you don't remember but I'm a shitty manager just like all of you and so I like doing that so and they deserve a good manager right since then I just ran product and now I have zero direct reports just like Dharma at HubSpot and so that's good because I'm not a good manager and I end and so I can if I continue to demonstrate to the whole company that even I can just change jobs at not at will but I can we can talk about what is it what is the right place for me at the company and it's possible for any given person including me that one day the answer is there's nothing here for you because there's no intersection that's okay if that happens because you're having this nice conversation and person maybe who's had this conversation can be armed with figuring out what that is at their next position so they can be happy fulfilled maybe Happy's the wrong work have it fulfilled so this is what everyone's doing and if everybody's doing this in their business it's magical I say it's idealization I know but it's a magical thing when everyone the executive team is in there is in their star slot and in fact everybody everywhere in that team it is a magical beautiful thing and you've built an organization it's not just a great business but the people want to workout and they're fulfilled at and that's more important in ARR and I'm sorry to say that it's a store where AR is everything but it's more important that you're building lives with people doing something important that everyone's fulfill that that's that is fulfilling a real job as entrepreneurs and that is that is the threat of so I want to close with one more reading this is from 2500 years ago just to prove that none of these ideas are new these are just what humans do this is just what leadership and building organizations is so this is from the daodejing an old text and it really summarizes everything that we just talked about the best leaders that people do not know they have them the lesser leaders are loved and praised even lesser are feared in the least are despised those leaders who show no trust will not be trusted those leaders who are quiet their words are valued with the best leaders when the people's task is completed the people will say we did it ourselves so I say unto you to close this sermon hire the right people and let them do it themselves be a shepherd not an emperor be an editor not a tyrant do the hard things that are the right things and set your ego aside because remember no matter what you will still get the credit thank you [Applause]

Channel: SaaStr

Views: 41,889

Keywords: wp engine, jason cohen, saas, saastr annual, ipo

Id: Kn5MbZoSRNM

Length: 29min 6sec (1746 seconds)

Published: Mon Jan 07 2019