The Things Nobody Tells You About An $8B Acquisition with Ryan Smith from Qualtrics

I'm Ryan Smith ry an SM ith co-founder and CEO of Qualtrics what we do is we help companies close the experience gap we wanted to automate research that was being outsourced and then we wanted to take it to the world dropping out of the basement and closing Sabre and Travelocity for seventy-five thousand dollars and we're sitting in the airport going do they know that first of all I'm really young second that I'm in a basement the one thing that my father gave me number one is there's nothing he wouldn't do and our big guests of the morning just pulling off a big deal s AP CEO bill McDermott in Qualtrics CEO Ryan Smith I'm more excited about the future than I have been about the past we're just getting started we're already to the point where most companies never get to it's gonna change how everyone thinks about cloud and SAS forever [Music] whoa let's welcome Ryan Smith oh thanks for coming back thanks for having me to see ya good to see you that would that picture of me in a row that's way back oh you're digging deep digging deep well when it's on YouTube it's on YouTube forever I think that's for sure yeah that's for sure so um this is impressive man it is come along wow it's pretty big isn't it yes it is has arrived yeah alright so we added the slide last minute literally backstage before he came on but Ryan and I did an event traction with Lloyd Lobo and like 2015 it was probably in the upper right this guy who turned down is that sound about right yeah what are knowing this was this was pretty funny stuff but yeah that's that was 2015 last year you were kind enough to join us last minute and call tricks was worth the stunning 2.5 billion dollars and then you blink an eye it's eight billion dollars that's what happens in SAS right whole world's waiting for you to just let gravity set in and fall and if you can just hit that next checkpoint yeah without crashing it's compounding that's what about owning it right and how long did it take you to figure that out um about 17 years 17 years now it's funny we were laughing a little bit about this backstage because it's literally the same headlight the same headshot done four times but it is also representative compounding right you do it right and you can rewrite this headline in a few years and the number goes up the backstory here is we turned down an acquisition offer for five hundred million dollars in 2012 yeah and I had done I mean we were about a 50 million dollar sales run rate but I'd never done a media interview oh I say further so the first media interview or press release we did we said hey we're raising a Series A round and Julie board from Business Insider got on the phone and was like how old are you and I was like I'm 30-something years old she's like do you know how much money that is well yeah it's 500 million you just turned that down and so she literally wrote that article and she scared me because she's like I I like had doubts I was like what am i doing I raised a series a I turned down the money so when we were going out to raise we raise it a billion our next round the first person I called was Julian hey remember when you told me that I was crazy and this is what happened like here's a billion so when we raised it two and a half first phone call Julia again when we sold first phone call and she to her credit literally just put the same headline on on Business Insider now when they make you CEO of Sapa are you gonna call her first or 100% 100% right that's at least eight years out yeah yeah I'll be translate to German yeah now did they say we'll talk on but but of it you're obviously super inspirational Kara's make sure they already say Ryan's gonna be the next CEO of SAV they say this when all the eagles happen they don't really say that we asked and I've never like tried to be I didn't even want to be the CEO of Qualtrics but my brother were sitting in sequoias office we're both there and I'm like if someone's got to be the CEO and I was like actually I think I think there's a bunch of companies I have half a CEO right now yeah because it worked for level companies yeah in my brother like no-one's talking and the whole Sequoia partnerships like well which ones are gonna be and Jared's like I don't do media I'm out he doesn't do media maybe one media article and so that's how I became CEO and what did the deck actually might have that on the next slide let's look this is this is back man this is lower than that this is sort of this you went to Sequoia because I haven't heard the story and you're raising what was around five hundred no we know we're a zillion yeah quarter million yeah we raised it four hundred million dollars three hundred million dollars with Sequoia Excel so you're going in you're at 30-something million run rate and and the team deck doesn't say you the CEOs no what does it say it just says we're the founder Smith Brothers this is family yeah that's it we called ourselves a team of four actually who operate and make decisions and it's just how we rolled and you know Jared Jared started this is in 2002 he's got the end Tony o Banderas look going on there and then he took off to Google which was really weird tell you the more to break your heart Orissa at the time cuz I don't think we thought like we were gonna do a startup I mean I remember debating for a week and a half whether to buy that sign there there was $50 right and my dad had my dad had kind of operated in the dot-com and and had a massive bust yeah so he was at scar tissue it's made you scarred I still have a little myself yeah I mean most people who haven't been through that it's not fun right when every single budgets cut and you don't matter and you know we we operate in geração chair took off and he end up he end up running Google China and a third of the world's internet search and then I convinced him to come back in 2009 and you know kind of the rest is history we've been working together ever since we're we're working together now so one thing on this slide cuz we'll talk about the next one what is serve a professor of a product that's who we were back in the day we were the survey pros and you know I think we we decided actually unfortunately we won the domain name but we got in a lawsuit Oh someone had a trademark Oman trademark on it but they didn't even know how to run like that exterminator the survey Pro and so we had a switch and we chose Qualtrics and it was the best thing we've ever done because everything we ever wanted to do were pivot the company or get away from surveys which you know in 2007 were like wow this is way bigger we could do it under the Qualtrics umbrella and so everyone would get after us and say well it's not descriptive I don't know what it is and you know reality is people don't know what anything anyone's creating is you know I'll never forget when you know so first of all for the first 10 years we didn't do one media interview and we got 250 million in cells think about that right not won any media interview not one press release then we feel like we put on a clinic the last six years you know I've done CNBC 13 times been in Forbes fortune you name it yeah and what was the goal of it just you were supposed to do it right you were supposed to get out there you could recruit you could do fundraising rounds you could do all this stuff and then you would arrive we closed the deal with sa P I get on the phone that night it's myself and Bill and all the investors first phone call hey Bill you spent eight billion dollars on a company that no one's heard of I was like what the hell three hundred three hundred articles about our IPO out there yeah and no one's heard of us and so I think that it's a founders and it might be helpful you know there's this whole rationale of fundraising and marketing that you're going out there so people will know you were they're not gonna know who you are so just go build a good business yeah you'll be happier but it does help for recruiting and other things as you scale doesn't it you don't think so I think so I got a little bit but I think it's overrated I wouldn't raise around just because there's this hope that people know who I am yeah what about bigger partners and things like that bigger does that help to have that impact ish ish I'm just continuing to be a student of brand right and then you have a phase transition you have a mini brand and then you have a brand and then once you have a brand investing that it actually is more important than we realize we think it's silly in the beating of founders right but then this Qualtrics brand is so important that what you've got to think about what can you do to support it yeah in in brands absolutely it's worth every ounce of investment but I think I wouldn't make decisions solely around that it's like making your whole life decision around avoiding taxes it's got a good strategy right so so you're gonna have to do it it's important but at the same time it's the same way brand go build your brand but I think brand and marketing are different where I see a lot of companies raising around and plugging their cap table into the marketing engine yeah well I did this happen today yeah which is like okay that campaign was worth 5% of your company when's that ever been effective well wait until you ride a scooter company my friend skill figure I run over those scooter on a scooter maybe in the future so this is a fun chart I think this was in I stole a bunch of slides from Alex Clayton it's part capital from his medium post thank you but I think this was from your prospectus right and I wanted to high up talk because just a couple we could talk about this for the whole session but Qualtrics is I consider I still considered a bootstrap come my definition because bootstrap is do you hit escape velocity without capital and whether you're like Qualtrics or at last seen or others and you choose and escape to raise money to for whatever reason secondary acceleration but you did it the hard way right and so it was now I'm trouble reading squinting but it actually wasn't a rocket ship in the early days so it took ten years to get to thirty million in revenue and the first couple years was as close to zilch right yeah I mean we targeted the academic market right which is a horrible business model yeah PhDs who are all power users they can really spend all day in your system because they have nowhere to go and what's their budget what's that see you Roger they have no money so you're not running your MBA exercise and saying hey let's do a startup let's let's get our swag and all of our all of our backpacks and go Target the academic market yeah who's not gonna pay us anything and no one would ever invest in that period of time but it's actually funny because in hindsight it was the most brilliant thing that we did and everywhere I go and we were on the roadshow and everything it was WOW that was the most brilliant model I've ever seen because you know millions of academics use Qualtrics and then took it with them into the workforce yeah and so it's kind of a it's kind of an interesting and that's happening every single year and so as we grew we actually learned to develop great products in that face because you know if you've got to develop a product where a PhD or researcher calls in imagine the support system you've got to have on the other side to support dan Ariely who is the behavioral economist and he's calling in because he's running his projects on Qualtrics or Dan pink right the author and they're all doing that they're really smart people so your product has to work and that was what prepared us for the enterprise now let's let's I want to talk there's a lot of benefits to doing this way we'll talk about dilution and capital isn't it because it's a topic or both interested but but and but let's step back for a minute there's we can talk about burden lime and all these funded comes we can we can do it in SAS but no one wants everyone would love to bootstrap let's if it were if it was simply a binary choice shall I sell 90% of my company or I think I think we can all make the same choice but looking back you started in 2002 and it was a terrible time to start but also good because there weren't 10,000 companies each year out of Y Combinator and EF and others would that PlayBook work today would you have enough the questions do you have enough time to go out in the desert for three or four years if there's 48 other survey pros or Qualtrics out there today yes so I think if you look at this this is a great way to look at for those who are new and attack if you look at 2002 we were in the shadow of the dot-com that was still up office robbed bomb yeah we had like five years of really good time and then it hit again hard hard hard and everyone who had raised capital like went to like they were all in the fetal position yeah and we were bootstrap I've stopped hiring salespeople yeah which never happened hiring sales thing ever yeah right and so we we went through and we were saying you know we're probably not gonna it was my father and my brother they're like hey look we're not doing this if we're gonna have outside bosses and and actually the amount that we would have given up was it was expensive I mean I'll just tell you from 2009 10 and 11 every year we waited our valuation went up a hundred million dollars back then yeah right and so basically the longer you can spread it out the more money you end up with for your employees and for your and aside from the financial side I will tell you this is your cap table is your number one asset is a founder and as a company if my kid was joining a company the number one thing I would say is hey great that's a great market this is all what's going on what's the cap table look like yeah because I've watched in the in the areas that we compete in I've watched really smart people really smart founders just get lapped by us because they had a bad cap table and you say that but let's dig in for a second because um what do you really mean by that pie you mean overwhelmed by too much capital because there's all there's all these stories out there but so if we would have had capital we would have never gone after the academic market it actually sometimes an influx of capital can make you take the shortcuts and you need the scar tissue to run a business in the out-years that you can only get from the suffering in the in years well that that is true yeah right so we know as a company that we could pivot from the academic market to the corporate market we couldn't buy it we had to pivot we had to go through and stand this up in an efficient way that worked in scale so when we got to 2016 it was in our DNA we had it we knew we could innovate we knew we didn't have to follow the rest of the markets that were going this way no we're going that way why because we didn't follow him in academia we didn't follow him we went into corporate and then when we went into enterprise we did it a different way if we would have just bought our way through I don't think we would have had that confidence or DNA to pivot the whole company and create this new category of experience management which is really what s ap wanted yeah but let's step back because there's an interesting thing that a lot of founders think about so I should know this so Qualtrics doing plus or minus 500 million at the time of the deal right 500 million sales yeah okay what percent now is from that academic market that original market I should have pulled this up and read and we don't release it so you wouldn't have found it but it's still a heavy heavy pieces but it's a minority right it's a yes it was 100% of the business to 10% of one probably 10% yeah so the question is this is a question founders because you're talking about this when you're doing well in a small market it can be exhilarating but also frustrating you see these other Tam's you see you look around you see Dropbox and folks how do you know when to stick with these smaller markets and dominate it versus move across this chart how did you know what is a timing thing I mean the academic market is not one that you look at you say hey look I mean what do you do look at blackboard and be like okay that's the Holy Grail yes right in in we always had a goal that whatever market we were going into we wanted to be number one at and we wouldn't go into the market if we did that's the class you could never walk away and if you look at what we're doing right now the experience management platform customer experience we believe we're gonna be number one we believe we are brand experienced measuring people's brands employee experience there's been 10 billion dollars in acquisitions in that space and we're kicking butt we've already created a unicorn and both customer and employee and then product and we're doing it all on one single platform instead of all these different systems and so we won't go into one of those verticals if we don't believe we're gonna be number one and we're having real conversations with ourselves we're not drinking our own kool-aid Sam hey we're gonna go do it no like literally can we be number one and we went to employee experience I was like I don't know if we can be there's been 10 billion dollars worth of acquisitions what what are we gonna do that they missed and like sure enough we we've had two of our competitors sunset all of their technology and move everything over to Qualtrics which I if you would have told me three years ago I predict that predict that and so I think it's I think it's just plowing away and staying focused we had a goal to focus on 250 universities and every time I call my brother when he was at Google he'd be like Ryan you're all over the place every time I talk to you you want something different do not call me unless you're gonna talk about the 250 universities and he literally put me in the box and guess what entrepreneurs they'll get out of the box yeah so I got to 250 universities it took two and a half years and once that happened we hit like the tipping point and it went but I see the same thing now so in 250 ruff what was a revenue roughly just try to remember back like 18 million by 18 by Matt or let me let me roll it because as founders struggle with this their Tam the other days let me get your pay if your pick you can pick any air our number you want but if you're at a million in revenue or two million and you're growing double digits is your market too small a million in revenue growing 10 percent or more a month I mean if you're tripling or quadrupling should I worry about my Tam if I can go from one to three or one to four and a year does it matter I mean look I always look at those young companies that if you're not doubling every year something's wrong yeah right so if you're not doubling your market every single year that's what we did we win from one one and a half to three two to six to 12 - and that was my goal and we always hit it but there were times where we could have grown faster if we would have executed better so trying to understand the execution of the market what I look at in the market is like okay I just sold Kellogg Business School how many Kellogg's are there how many are globally that's what's it gonna take all go through say it's at am and then we're the adjacent markets but but the problem with Tam like I'll give you great example we were in the academic market I said Wow we're selling a research platform to a university let's go to the CIO CIO is like yeah this is cool but wouldn't buy it I was like well let's go to the institutional research department their institutional research department was like yeah we know research is in our title but we're not gonna buy it and I'm like whoa this doesn't make sense let's go to the business school because they got all the money so then we went to the business school and then they wouldn't buy it and I'm like three months six months nine months I'm already nine months into this program and having found the buyer yet it's rinse and repeat so then I called faculty members in the business school well they bought it convinced the department to buy it convinced the Business School to buy it then we got institutional research then I show back up to the CIO and I'm like you want to do this the hard way or the easy way right and then we sold all the universities so so part of the TAM problem is you would have looked at that cio and not realize that you could have gone all the way up through and that's how it that's how it happened and I think I think if selling Sequoia totally shorted our tab I bet right I bet a hundred percent you know what I would ask you know what I would ask the question is the is the TAM growing and at what rate yeah or can you redefine the TAM based on what your software does yeah and then what what are you going to get because people are like oh when we were starting oh it's a fifty billion dollar research team and I was like yeah but Nielsen isn't going away right so it's like just how much of that are you going to get yeah when I went and presented the VCS I was like look here's the Tam I don't care about it this is how much we're gonna own and I got it from 50 down to like a billion and say hey this is realistic and they're like well no one's ever presented that way I was like well what you're gonna present to me isn't gonna be right so you can win a tam argument with theses is learning right I mean look everyone wants to know what V sees care about cash yeah it's a universal language you got cash they'll invest in you so this joint I love but I want to hit some other stuff unless you want to talk about this nice growth here we can get some other fun things in terms of pay I mean it is it's our founding its compounding interest in the whole world sitting back like I said waiting for gravity to set in and when that's gonna flip and if you can maintain I mean we grew a 47 percent last year 500 million in cells yeah so everyone's like si P paid a lot of money for quasi well did they fast no we're in two years it'll seem cheap right very cheap I think it'll seem cheetah that's that's the magic when pounding let's hit that in a minute I wanted to get one thing in here and then let's talk a little bit about M&A make sure we have enough time but this is the s AP sales sales are yeah so a hundred thousand strong 1 million how big is this si P so how do I get access to them yeah yeah so one of the things that's interesting is you know I didn't know a lot about ASAP right I knew every other CEO and what the companies could do I'd recruited people but when I met bill it was like hey Ryan I'm really passionate about your vision and what you want to do I want to go and power that and we would love to have it and I'm like well what do you bring to the table and he's like well you know outside of a check what do you bring and it was like I bring the ability to go to market globally I was like well we have a good engine they're like no we have an engine and I was like ok so two Thursday's ago I was in Vegas at ourselves kick-off for North America and there was 8,000 sales reps in the room and I was like holy cow I got onstage and it's like four times the size this and I was like wait all of you are selling our products that we're developing and that was really why we did this we have this category of experience management we think the whole world is going to be competing on experience and we want to get it out there are developers want to develop products that everyone's going to use and so this was a compelling event and you know everything's been as advertised so far and related that this is a topic it's probably more fascinating to me than some folks but this is this is an incredible sales force but how do they sell another product do you know the answer to this yet because this is what I learned like yeah sales reps they can only sell so many products so you can it's on this rocket ship but how do they tack that on to their inventory management system yeah the ERP system and sell altogether and so I think I think with most companies is a longer discussion but most companies you're bolting on something here yeah cool thing about sa peein Qualtrics is were here so you've got ERP which they're doing like 70% of the world's products come out on but they don't have something to measure the experience of that product when two-thirds of the products fell so now they have Qualtrics they have an upsell yeah and so in its in its part of that vertical or like 90 million people are on success factors yeah right but there's nothing to get to gauge that's easy for the employee experience well now that's there so it's actually out of everything it's not like they're going in back to sell arriba it's like it's right there yeah and so and it's it's really it's really this is why we did it because most companies I was who had expressed interest we were kind of the runaway bride when it came to selling us but most companies they were one-dimensional they were only marketing or they were only sells and s AP has product and employee and then the CRM and everything else and we're like whoa we have product employee you know customer and so that worked let's I want to talk about any but let's go back to the slide and talk about something different for a minute that I think will people don't get if they haven't done it so eight billion this number doesn't come out of nowhere does it it sounds like a lot of money and it is a fair amount of money by historical standards but your IP owing at a certain number right the market actually there's a there's a comp out there and you're you're wheat you're days away from IP owing and who'd you have goldman morgan stand or gun and goldman or girl that's either Goldman or Morgan or Morgan or goalies and they're telling you they're looking at the comp seniors they're saying you're worth five point six eight two three four billion and this is just a premium isn't it it's some level it's that simple isn't it yeah and they did a great job and we would have had a wildly successful IPO we were all in the IPO that's what people I was watching I was high worried not running a dual-track I invited 300 of my closest friends to take mortgages on their house to go buy into the friends and family and then that was like Oh j /k it was like a pump fake and everyone went flying by and then we laid it but this is what happened yeah in you know we've always done unconventional things at Qualtrics and this was just one more unconventional thing that we did and and we're gonna keep running it which is also unconventional everyone asked me Ryan what are you gonna do next your cheque just came out what's going on like my wife only let me do one tech company this is it and I'm either gonna have to tell you all goodbye or it's a generational company it's a generational company and my goal was to get Qualtrics everywhere and this is the best way I've seen to do it so so eight billion to some folks on reading Business Insider it may seem crazy it's not it's a premium to IPO as it should be you know because if you're gonna take something off the table you can't pay under market right it's actually fairly but let me let's do the second math which is even less intuitive let's talk about the dilution related to that so an eight billion dollar acquisition is equivalent to how big of an IPO probably 11 or 12 11 or 12 this is it's just an interesting thing to think of and this is this will also be true with your Series B in your series D in your Series E if you do them because you're gonna sell a quarter of the company have yourself fifteen percent in the IPO plus the other taxes associated with it yeah I mean I always looked at our IPO as our series dear ound seriously around yeah and everyone's like okay I'm gonna raise here I'm gonna raise here I'm gonna raise here there's two things that are happening that scare me if I look out at tech and I watch a lot of companies I advise there are two things that scare me number one founders and companies are not thinking it's it's long enough it's gonna take longer than they think all of them right all of everyone ever all of them yeah nothing we've ever done has been shorter than we thought Yeah right and we've seen this and I've got a great peer group in Utah it's and you're gonna hear from Aaron scanner who we're the same cloth I mean it's like twelve twelve years I mean we've been going it takes longer than you think and it want to be like no no no and I'm like just watch because all it takes is one little hiccup in 2007 six and eight yeah I mean look look here's a prime example look at November this year right we're ready to go on the road the stock market crashes a little bit we show up in New York we are the only company on the road oh is that right everyone stopped and all it takes is one little hiccup and then okay we lost a year no one's going for the second thing is you talked about however many unicorns there are yeah there's a myth that I didn't know about and I've learned you know when you get over a billion dollars or two billion dollars there's not that many companies that can acquire you that's for sure and they don't buy all the time so if I look at it now I say P's not buying anything for a while we took all their powder in the country waves right si P bought success factors and concur and then then digest it and they have to digest Adobe just bought Marquette oh it's a lotta guys a lot today yes that's right and you've got to go to an outside public board and say hey this is why we're gonna do it so if I'm a founder and I'm running I need to protect my cap table and say this is gonna take longer than we think don't get emotional just play the long game and number two prepare to go public and be perfectly okay with that and build your company to be able to do that how early do you mean prepare just know that there's no other option well that that's that's that is a an important insight right and I talked I bumped into like five founders at registration this morning asking me about potential M&A for companies they don't really know like that doesn't help does it know prepare to prepare your only option prepared is to IPO it may take twenty years right however long it is if you're not building a company that can stand up and go public yeah then you're probably gonna be no one's gonna want it anyways and you there's gonna be an outlier or two where you're gonna point to and say that but no one ever really I mean s ap came in because we were ready to go public that's that's what they're not gonna move without a compelling event and that was great and it worked out for everyone let me just make sure I got this one one because I know we moved in around but I want to hit that dilution one where did we have these statistics let me flip through I think this one didn't move but I want to hit your we'll just talk about it this one right cuz I know it's a passionate let's let's hit these two topics because we'll run out of time but somehow this took 17 years right and for all intensive purposes the founders alone maintained almost the majority of the company put together the rest of the employee board the the team owned the majority of this company right and so you have a lot of thoughts on this and it's not just raising money if you talk to you know I was on a board with John doar a while ago you know the legend of venture capital he modeled six percent dilution a year like everything he's doing and when he tries to figure out what the valuation of his founders we think it's 30 pre he's like no no no no no like I got to figure out how long my money is and I'm getting inflated by 67 percent a year plus he's doing his own wrath and it's going up so how do you manage a cap table for her for the better part of two decades like this yeah so we didn't give away stock I know that's weird here but we didn't give away stock till 2012 so mm Oh mm 12 yeah and did you pay up more or you just bury the best work environment and just alright work environment people had to buy buy-in on the mission and I think that was that was part of it I mean one of the things that I'm really proud of is that there's a billion dollars and only 30 million dollars of it went to people who weren't in the building at the time of the transaction yeah I think I saw one out to people myself and I didn't sell for eight yeah you beat me on that one too and I see I see a lot of people and so some people are like okay why do the founders have so much well we're we were phenomenal stewards over it it's not that we wanted it all it's just we our job once again think you're gonna be doing it forever right our jobs are to protect that if you look at you know Mike and Scott Atlassian same model if you look at Larry and Sergey if you look at you know Gates and Alan it's the same thing where it's the one commonality that they have I wouldn't even invest in a company if a founder didn't own if we're raising a series a if they didn't 20% or more yeah my rule they got to be double digits by IPO yeah because the staying power and they've got to care more than I do right and then I think if you look at it you might look and say whoa they've Ares four hundred million dollars they didn't put any of it in the company our VC's returned more than I mean I think it was a top three in excels portfolio maybe number one and insights they both I know excels talking a lot about it on the road yeah yeah they they took over a billion dollars out so they won yeah the founders did pretty well and we created more millionaires than any company I've seen you know that related this isn't learning for me over time when I if you're going long we're talking about generational companies you want to treat our we mean your employees love your team loves you but when the capital walks out the door it's tough right what you want to have when that exit comes you want as much of it concentrated on the folks going long right so I'm all into crazy fat especially for founders like a decade vesting schedule four founders right because there's nothing worse than when your co-founder leaves a weekend and you found a way to do that right is to concentrate that on the folks that were there and what's interesting is with with sa P now it's pretty clear that outside of about six or seven people every single person in the company will make more money over the next five years and they did the prior 17 so there's power lies there to power laws massive power loss going forward which is what's exciting and why we're all pretty excited to go do this yeah so I mean it's just just think about it I think it's something to think about is what what is your cap table look like when we raise our series and we never thought we were gonna raise another round you're you're gonna raise once you're on that track you're gonna raise so what does it look like and you know I see these companies that are like okay I'm raising my Series F and it's like they're 150 million in sales I was like plus the the IPO round and all of that you know if you offered someone in the series see one percent of the company they might end up with 10 basis points by the time they get there right I mean it can be rough it can be rough so you got to manage that carefully so just two things I want to hit because we're running over but this is always fun two things I want to talk about maybe not this one it's not here I'll jump around too much but two last things in terms of building generational companies and decades revenue retention because I hit on it before but but this is set this is so hard to understand in the early days at 500 million in revenue you're retaining a hundred and twenty some odd percent of your revenue from the S one yeah it's ten thousand custom ten thousand God's mercy and and again you said this to me backstage and I brought it up that meant if you didn't close if you don't close another customer ever but you keep your customers happy you can eventually build a many billion dollar company without closing the deal right and and this is the power and any quick lessons beyond getting that number as high as possible what are those N lessons on this and that negative turn in this and this positive revenue versus well you got to have good products that people want to use that's that ultimate thing is like we can market ourselves we can say hey Qualtrics is this or that or it's overhyped or this or that but if you've got ten thousand brands yes and one hundred and twenty two percent net retention and then the enterprise it's one hundred and forty that that means that you've got a solid foundation of solid ginger where people are living in its mission critical to them yeah and we had triple digit growth through two thousand seven eight nine and no one knows what's gonna happen in those environments and where they sit on the pecking order of budget cuts you didn't know right how I didn't know how efficient critical are I thought we were in trouble yeah and then I was like whoa all their outsourced money is now going on Qualtrics and they can do more with less no and the products they really relied on in those days did they did but I was amazed I mean I'll give a great example as Sears was was in bankruptcy and and in Kmart they were all using Qualtrics even up to the last couple days and I was like wow this is financial story right they were trying to figure out experience data and how they can maybe pull out of it without just looking at the operational numbers yeah like what do people think how can I go and so I think that was what what we benefited from all right wasn't so this is great I want to but one last just fun question let's flip back to my mic drop slide of the crazy deals of my journey and SAS this one quick we don't have time this is the leaderboard for last year it's not a competition is it not even close but it's still fun to be number one github was a cool one too wasn't it just a student of SAS github is pretty cool we raise a Series A in 2012 with largest Series A since 2008 github came out a month later and raised a hundred million yeah and that was then the largest series a and then all hell broke loose and fun where there is some interesting parallels but on this one I I put together slide of the as a student and founder that the my mic drop deals and they're for different reasons right Trello come in we all love Trello Michael's been here but then all of a sudden for 250 million for 10% of it last ins market cap zone well that's a big bet to add I was with Mike when he was going out to do that and he's like I'm all in on Atlassian and I was like that's a good solid make all stock my friend and then I made this slide and then Qualtrics at the end and then this 90 year old I mean like twenty thirty year old company ultimate software from the old HR days right get spot by PE private equity for 11 billion dollars was it even this week I mean the pace I'm overwhelmed with the pace like is this chart can I keep going up into the right is they gonna plummet I mean how many 11 to 20 billion dollar SAS deals can we do forty billion dollars yes Annie cycle here well 15 it's gotta be the new it's gotta be the new number I mean as market caps keep increasing then I think the number goes up so this is you're gonna keep yeah if the market caps crease agreement like if you look at like Adobe or or s AP or whoever whoever else the if they're going to two hundred three hundred billion dollar SAS companies or then the the low the low or the high bar that they could do actually will go up as well yeah so if the most they could do was a 7 billion dollar acquisition of your Microsoft and github and they keep accelerating its gonna be 14 now they can do a lot more because they've done LinkedIn and others like that but I think that that's gonna continue when you're having to give up 10% of your market cap you only do that once or twice alright one last fun question I think we got a break so on the slide we're also if I somehow build a billion dollar company billion our company now I'm growing 50% a year or more should I sell I can get a billion dollars from my startup or should I keep pushing on you know everyone wants to run through these we teach a little case study about when we turn down the 500 million thinks it's Stanford and and everyone's like Oh what was in that decision and it was really like me getting in the car with my wife and she's like Ryan you don't need a bunch of money and I don't want you home more so like like that is a decision though let's just go yeah I think everyone thinks it's this math equation like when I got when we wired our money last week nothing changed for haven't changed right there was like no emotional reaction the only emotional reaction I had was we created well for a ton of people and that is that's the only thing they hit home yeah and so if you think that you're gonna go through and all sudden okay I've arrived you're gonna be seriously letdown you'll be because it's about building it's about the journey it's about being in tech it's about building software that people are gonna use it's about creating it's about giving back and I just think that you know it's really about changing the world and I think that you're either changing it or you're not and this isn't gonna matter like we're super fortunate to be working in tech at this time and we just got to realize we could have been born in the wild wild west doing something else like that and so I'm just trying to appreciate every minute of it all right Ryan this is amazing we're a over but thanks again and come back [Applause]

Channel: SaaStr

Views: 21,114

Keywords: saas, saastr annual, qualtrics, tech, tech unicorns, scaling, acquisition

Id: yusANKiOcPU

Length: 40min 10sec (2410 seconds)

Published: Sun Feb 17 2019