00:00hi everyone welcome to the Asics & Z
00:02podcast I'm sonal and today we're
00:04sharing more founder stories this one
00:06hosted by Ben Horowitz and starting with
00:08one of our very own partners Lars
00:09dalgaard we cover Lars his own story
00:11founding success factors one of the
00:13earlier software-as-a-service companies
00:15it was founded in 2001 which IPO did in
00:172008 and was acquired by sa P in 2012
00:20the company focused on software for
00:21human capital management in the
00:23enterprise and on that note in this
00:25episode we cover Lars views on what are
00:28the success factors in talent scaling
00:30companies and most importantly scaley
00:32and culture over to Benin Lars hello
00:34this is Ben Horowitz and I'm here with
00:36Laura's da Lagarde and we are going to
00:39talk today about how he built success
00:42factors and achieved the first great
00:44outcome in software as a service and
00:47then what he took away from that
00:49welcome Lara's Thank You Ben I'm excited
00:51to have this discussion well let's start
00:53with success factors so you came here
00:56from Denmark how did you and success
00:59factors first get started and were
01:02people all fired up about it did they
01:03believe in you had you get it going yeah
01:05it seemed like pretty much no one
01:07believed in it we had the opportunity I
01:10personally did to pitch to 73 venture
01:12capitalists who all said no and that was
01:16painful because in some cases that
01:17brought them in front of customers and
01:19venture capitalists yeah I know those
01:21guys who the hell wants to be around
01:22them so it was kind of hurting my
01:25feelings it was hard and oddly it didn't
01:29really influence me much because I kind
01:32of felt that this had to be done and to
01:35me that is the number one piece of
01:37information for anybody starting a
01:39company don't try and catch a wave don't
01:42try and do something you've read in a
01:43magazine that might be hot and you can
01:46just get in on it because there is no
01:47such thing once you try to catch that
01:49wave that wave is gone and it's got a
01:51bunch of people on it that came up with
01:53it and they are well funded and it's
01:55over so you're saying don't do it if you
02:00want to do it or if you think it's a
02:01good idea only do it if you have no
02:03choice I think so it must be done it
02:06must be done and I think that's like I
02:08don't I remember asking Reed Hastings a
02:10long long time ago over a decade ago
02:12rice dated started Netflix after they
02:14suffer a bunch of other companies I was
02:15impressed with and at that time the
02:17story was because I got tired of walking
02:20the extra blocks to the blockbuster
02:21store with my VHS tape why couldn't they
02:24just use DVDs so I think it's to assume
02:28that imagine a 50 billion dollars
02:31streaming Empire it had to be done for
02:34him I was too damn stupid and and they
02:36every amazing entrepreneur I meet that
02:38when they start talking they get so
02:40steely-eyed when they talk about the
02:41reason that they're doing this and why
02:42it must be done and it literally means
02:44that nobody will ever extinguish that
02:46fire it will just keep burning yeah so
02:49did that what did that mean did that
02:51mean that success factors was
02:53straightforward to build because it had
02:54to be done there was a challenging or
02:57how did how'd you go from no from 73 VCS
03:01to to three and a half billion dollar
03:04outcome well first of all it was an
03:09exceptional effort of a lot of people
03:11that all of a sudden began finding a
03:15place that was as important to them as
03:17their family and their friends and it
03:19was a big part of their life and they
03:21gave it everything they had they left
03:23nothing on the field and I have over
03:2610,000 examples of what they did to get
03:28us there and I'm grateful to all of them
03:29it was extremely hard in fact I just
03:32spoke to my co-founder this morning and
03:34we joked about it never got any easier
03:38like look this is like when did it get
03:40easy and people asked us this thing when
03:42did you get into a glide path and on the
03:44stride it was like I don't remember and
03:46I was checking in with him do you
03:48no it never got easier so it was always
03:50hard it's different degrees of hard
03:52sometimes it was just physically hard
03:55challenge sometimes your brain turned
03:57upside down and you were wondering what
03:58the hell you were doing there are many
04:01different hearts and so why why did you
04:06continue so when if it was hard the
04:08whole way and every step of the way was
04:10a grind what was the thing that kind of
04:13kept you going every quarter is hard
04:15every sale is hard every product cycle
04:18every employee play quitting is hard
04:21well it starts back whether it had to be
04:23done I believed in the over value of
04:26creating a much much more
04:27richer better informed dialogue in the
04:30workplace across the globe whether it's
04:32a nonprofit or it's a the NFL or it's
04:35you know Walmart I believe that better
04:38dialogue create greater big lives for
04:42every individual goes to work every day
04:44and in the process the whole company
04:46could be lifted up because they could do
04:47better work and they could create better
04:49products and so I had to see that come
04:52into fruition and at 50 million people
04:54using it I began to believe that it was
04:57going to be a consistent and systemic
05:00change that would not go away so that
05:02was exciting for me the second thing is
05:04something begins to happen when you're
05:06together with people and and it's like a
05:08sports team you just have to do it
05:11together and you're excited and you you
05:13look forward to coming back and doing
05:14that thing they're all together it's not
05:16like you show up at 8:00 in the morning
05:17you're always doing it and so you know I
05:20had to find a part of that could accept
05:22that I was always working because I
05:23always was working and so were the
05:25people I was teaming up with and so it
05:26became a thing that we were involved
05:27with it was part of our systems part of
05:29our body so really interestingly the
05:33company that you built success factors
05:36helped other companies with their
05:40success factors and basically that that
05:43was the whole point of the company was
05:45to basically help people build better
05:48companies yes and so as you looked at
05:52how you did that within your company for
05:56your customers and then now as you're
05:59trying to help entrepreneurs do it what
06:03are the things that get people to do
06:05what you said what are the things that
06:06get someone to build a company where
06:09people are doing it for each other
06:10they're not doing it for like a billion
06:13dollars they're not doing it to sell
06:14their stock in series B they're not
06:16doing it you know to be in TechCrunch or
06:20on a headline but they're actually doing
06:23it for each other yeah and that's
06:25something larger than themselves like
06:27how do you build a culture like that so
06:29I think it starts with values and many
06:32times when I say that people say oh I
06:33saw those that another company I worked
06:35at nobody knew them nobody remembered
06:37them and it didn't mean anything
06:38well then don't make those values
06:41in HR off-site like exercise exactly
06:45wouldn't make some values that you can
06:47remember that you're proud to espouse
06:49that you want to tell everyone about
06:51your family your friends that when you
06:53look at those values they mean something
06:55to you and those are the type of values
06:57we had my first one was respect for the
07:01individual that starts and it said no
07:03 and I just believe that with
07:06every part of my fiber and I believe
07:08that if you set that tone to everyone
07:10then there is no discussion whether
07:12that's how we're gonna work together or
07:14what's an first of all everybody
07:16has one and I think everybody is not
07:20confused it's it's okay to have one it's
07:24just not okay to be one that's what we
07:25use to say the reality is everybody
07:27knows what it is it's somebody who is
07:29abusive it's somebody who doesn't think
07:33before they speak it's somebody who's
07:35not accountable for the they throw
07:36out there it's somebody who is
07:38politically trying to get somewhere
07:39without actually being part of a team
07:42that does somewhere it's someone who
07:43needs to put themselves forward at the
07:45cost of everyone else it's someone who's
07:47rude it's someone who takes advantage of
07:49a situation that they full-well know
07:51they shouldn't be I could keep going and
07:53going and going and going but those are
07:55all things that are really interesting
07:58but they're there they're generally
07:59things that people feel about other
08:00people but rarely feel about themselves
08:02so how how do you go about with a value
08:06like that building like real
08:08self-awareness and what are the object
08:11lessons that occurred in your company to
08:13change that behavior because you're
08:15really not you're talking about getting
08:17rid of a behavior rather than a person
08:19in a lot of ways when you say no
08:21yeah the way it ended up working for us
08:23was it became very self selecting
08:25because people that thought that they
08:27could still because we happen to be the
08:28fastest growing company for the many
08:30years in Silicon Valley so in that poor
08:32people were like I'll join this because
08:33they're growing fast and they won't
08:34discover who I am and I can get away
08:36with my ways but the second they
08:38came into an organization where you're
08:39actually allowed to speak up if someone
08:40is everybody becomes a police officer
08:43that that governs this incredibly
08:44important value and so many people would
08:46self select out after a couple of weeks
08:47and just say this is not for me
08:49Amanda this is I'm not there yet in my
08:51life I believe everybody can't become
08:52not an but it's just you need to
08:55much introspective you still want and
08:58some people have had so much hurt and
09:00pain and they have so little commitment
09:01to changing themselves that they're not
09:03gonna go there but I'll give you a very
09:05specific example of how we put this into
09:07practice which has a lot of allure just
09:11because it's kind of funny but it
09:12actually wasn't funny to me when I came
09:13up with it and became legend for our
09:15company which was it was very normal for
09:18people to email the CEO and say hey I
09:21don't like what Joan was doing and and
09:23you need to know as a CEO cuz it's
09:25really bad for the company and it's the
09:27opposite of what you want so if it's a
09:39double is two samurai swords and of
09:42course the shock then is when you send
09:46that email back and you copy Joan on it
09:49who this person was speaking about and
09:52you don't make either Joan or this
09:55person feel bad but you say how does
09:57Joan not feel bad well she's probably
10:00surprised when she sees it but what
10:02happens to her when she sees that she's
10:03being respected because she knew she
10:06wanted to know what the other person
10:07wrote and when she knows it and she
10:10knows she's supported by the CEO and the
10:12management that that sort of won't
10:14happen her whole life changes she gets a
10:18commitment to that organization because
10:20she now knows that she feels a level of
10:23safety and Trust that in this company
10:25that won't happen again and it's almost
10:27as if when they come into an
10:29organization they're thinking there's so
10:31much of that but I'm willing to do it I
10:32get paid it's a good job it's better
10:33than the other one and this works for me
10:35but I'm gonna tolerate that twenty to
10:37thirty percent of that's just
10:39unhuman that I don't want to be around
10:41but it it's how companies are but
10:43when you all of a sudden see that being
10:44completely x-rayed and it's right out
10:47there and you say in a very supportive
10:49hey you wrote me this about Joan I'm
10:52sure Joan would like to know and I think
10:53you guys need to go figure this out so
10:55first of all in our office we all sat
10:57out in the open nobody had a big fancy
10:58office we're all sitting on the same
10:59desk and what you can begin to realize
11:02around the offices people seeing the
11:04electricity that happens and then they
11:06meet and you see them talk about it and
11:08something magical happens because I
11:10think deep down everyone wants to have
11:11that conversation and that person who
11:13wrote it actually want to tell Joan they
11:15just aren't equipped to do it and
11:17they've gotten scared of doing it and
11:19what happens now is now it's endorsed
11:21and it's formed we need to have this
11:23otherwise this company can't move on any
11:25Varla and that's what the power is of
11:27that type of exchange and when it begins
11:29to happen throw out the owner and
11:30guarantee you never get an email from
11:32that person again and you actually begin
11:34to see the two of those people work
11:36together I'd say nine out of ten cases
11:37they become people who trust each other
11:40and start working together people can
11:41forgive well let's let's get to the one
11:44out of the ten cases and you know a lot
11:47of CEOs in Silicon Valley would say look
11:50we're in a war for talent and if that
11:53person the so-called that person is a
11:58whatever 10x our top end engineer who
12:03arc often the kind of people who will
12:05send you an email like that and I strip
12:08them naked like you're talking about
12:10emotionally naked you know they might
12:12quit and so like I can't afford to lose
12:15my 10 X Eric how do you how would you
12:18react to that kind of thinking oh I'm
12:21completely comfortable losing the 10x on
12:23what the total unanimous team that are
12:26together in fighting this big battle can
12:29gain together because they have that
12:31power of trust completely Dwarfs that
12:35110 exa and you multiply all those
12:37people up what they were doing like that
12:40and let them perform together
12:42there's no 10x and no single 10x so that
12:44can even think about competing with that
12:46type of power and I've seen that at
12:49scale and it's nobody can stop you I
12:52believe strongly it's what Southwest
12:55Airlines did they came in and turns
12:57through everybody said there's not Lee
13:00you can't do anything in this what are
13:02you thinking and 20 years later their
13:05market cap was that of all the others
13:07combined yeah you can yeah
13:10let's talk about scale for a moment so
13:14success factors was the biggest thing
13:18and most important thing that you ever
13:21so how did you learn to run the most the
13:24biggest thing that you have I ran like
13:25how did you go about that so how do you
13:27learn things you don't know and how do
13:29you learn that the speed you need to not
13:31lose market share and not get killed by
13:33a competitor you think you have to adopt
13:37a perpetual e-learning mindset and in
13:41particularly my hardest part was I'd
13:44like to be right and I didn't really
13:46like to admit that I was ever wrong and
13:48I really didn't want to personally ask
13:51anyone anything in fact you can't find
13:53any of my friends working for my company
13:54for the first decade and you couldn't
13:56find any of our customers being any of
13:58my friends and many of my friends run
14:00big company so that's a bit stupid you'd
14:02think for me it wasn't because I thought
14:04it was complete waste of time signing
14:05them up it would be like a que retsu or
14:07a pyramid scheme like of course they
14:10would sign off but that's not what I'm
14:11here to build I'm gonna build a gigantic
14:13business that can really with Seraph
14:15friction grow to massive scale and be
14:18amazing to everyone involved and be very
14:19profitable and so if I'm just signing up
14:21all my buddies that doesn't tell me
14:22anything and informs me nothing so it's
14:24a waste of time I can always sign them
14:25up so what I wanted to do was find out
14:28how do I get customers that really
14:30believe in what we're dealing with and
14:31so therefore my biggest principle came
14:33not lying to yourself and what that
14:35meant was reams of data because it
14:39doesn't mean I'm a complete math freak
14:40it just means the data doesn't lie as
14:42much as your own brain does and you can
14:44come up with all sorts of
14:45interpretations around why what you're
14:47thinking is actually right but there's
14:48nothing to prove in also I had massive
14:50instincts and more ideas than I quake
14:52has owed so I always throw new things
14:53out there but if I had data underneath
14:55it I would make sure that it was
14:57actually somewhat realistic that I was
14:58gonna go there so what I wouldn't track
15:00was to twelve and a thirteenth month
15:02only I would track every quarter and
15:04every month was always very easily
15:05accessible not hey can you guys go get
15:07it it was right there in front of us and
15:09that did not tell as many lies as my
15:11brain did like I would think a market
15:13was actually doing well and the data
15:14just wasn't there and then we had an
15:15organization where people allowed to say
15:16but it's not there you'd like it to be
15:20there but it's not there it's just not
15:22there and so that type of truth in what
15:25you're actually doing and then also
15:26allowing other people to believe that
15:28they could tell the truth and not get
15:30blamed by hey you're speaking against
15:32this person and therefore you shouldn't
15:33be allowed to talk they
15:35having a culture where that's allowed
15:36it's permitted to speak your truth well
15:39getting back to the the war for talent
15:42because I think this is where I see a
15:44lot of entrepreneurs who would not do
15:46what you're talking about
15:47they like to always paint the rosiest
15:50view of their company particularly to
15:52their in place the last people they want
15:54to say luck the data says we're
15:56the data says we failed or the data said
15:59we missed because they want to go oh no
16:02it's going great like when I told you we
16:04were gonna be the biggest company ever
16:05when I recruited you and you are gonna
16:07make 100 million dollars like that's
16:09still true and so how do you think about
16:12that and how do you reconcile having an
16:15honest culture that doesn't lie to
16:18itself versus keeping people like who
16:21are very focused on their fiduciary
16:24responsibilities to their family
16:26yes dang in the company so nobody in my
16:30company sold before we went public
16:31secondly micophone and I agreed that if
16:35somebody would ever say so when are you
16:36going public they could not get a job
16:39and that's pretty extreme but it tells
16:42you our culture we weren't there to go
16:45public and despite how many people have
16:48said this and it's just the it's a
16:49financing event and so going public
16:51cannot be a goal in itself and if that's
16:54what you've put in everyone's head then
16:56you're constantly fighting that until
16:58your public and that's not the way you
17:00want to be you want to take everyone's
17:01energy and put it into building
17:02something of value that they can relate
17:04to and that's how you bring it back to
17:07well so this quarter wasn't great let's
17:10talk about why we don't think it was
17:12great and what went wrong and what your
17:14role is in fixing it the amazing thing
17:17is I was so afraid of admitting this for
17:1910 20 years is people actually want to
17:22be led and if you give them very clear
17:24leadership around what their role is in
17:26taking us to the promised land that's
17:28not some big number another thing was I
17:30got a very big resume personally and who
17:32would in the leadership team who said
17:33we're almost a thousand employees now
17:35let's tell everyone how is that a goal
17:38to have chief that that wasn't employees
17:39doesn't mean anything it's a lot of cost
17:42it doesn't mean a thing and so why bring
17:45that out there or now we're valued at a
17:48I tell anyone that it's just not
17:50important what's important registered
17:52users they're just registered they're
17:56just registered yeah yeah exactly so
17:59what matters is let me have this
18:01customer come up on stage and talk about
18:02how their life has actually been changed
18:04because of the work you've done or let
18:06me pick an engineer that that's
18:07something that everyone thought was
18:09another thing we would do is we would
18:11pick MVPs which was very very very
18:13unpopular but I do this way to the
18:16algorithm where even somebody who didn't
18:17have as many people in their
18:18organization would get a fair value
18:20based on the votes that they were
18:21collecting and having this absolute
18:23score we both did that as well as the
18:25weight of the algorithm ended up the
18:27same way and so we'd have people
18:29actually being cherished in the company
18:31for the contribution they had had and
18:32the number one thing was how they
18:33contributed to everyone else's
18:34productivity and that just became legend
18:38for that company we had these batons
18:40like when you're running the four by 100
18:41that we would hand out to everyone
18:43showing that what we don't care about is
18:45you throwing another word I learned when
18:47I came to Silicon Valley was throwing
18:49something over the wall it's like the
18:52most asinine toxic thing I've ever heard
18:55in my life and people would say it with
18:56a big smile on their face I just threw
18:58it over the wall to the product marriage
18:59brew and walk off who the hell wants to
19:02receive anything that was thrown over
19:03the wall I have something that is like
19:06if she's seen Carl Lewis practice the
19:09hand oh of that baton there was nothing
19:11they hadn't thought about they didn't
19:12shatter those World Records by accident
19:14Carl is that famous track star in the
19:1780s for those of you who are young he
19:19was legendary yeah but what they would
19:21do is they would show you how to nail
19:23that hand over it was timed perfectly
19:26and there was every little millimeter of
19:29handle was figured out and that's how I
19:31always started back on in mind of
19:32building organization Drucker sort of og
19:35of Management would talk about the real
19:37power an organization is not in the
19:39silos it's when you can leverage across
19:41the organization product management to
19:44marketing sales to engineering when you
19:47can have a fluid communication flow
19:49there that it's honest you can do in
19:51same thing with a company you can be
19:53moving on to board of directors as a
19:56board of directors really important for
19:59a young company isn't just that just
20:02waste of time I mean having a bunch of
20:05guys who you know sit on your board and
20:07you got to go present to them every
20:08quarter aren't you better off just
20:10running fast breathing down your throat
20:12asking you a bunch of questions that you
20:15don't want to answer yeah
20:17well I think there's at least three
20:18things first of all a board member will
20:23the combined board will never know more
20:25than you can balance on a pin head of
20:27the company and they shouldn't that's
20:30for the CEO to know CEO runs the company
20:32but what I learned the hard way I would
20:36say as I expanded my board is that these
20:38people are people who care about your
20:40company and they actually understand
20:43company building and if you've hired
20:44good people so the same degree that
20:46you've built the great company then they
20:48will give you advice that is
20:49immeasurable and its importance to you
20:51and many times you can't see it at first
20:53it's back to that learning mindset you
20:56just can't believe it even and
20:57particularly because you're probably not
20:59that challenged in your daily job
21:00because everybody adores you as the
21:02founding CEO that's so amazing that's a
21:04rock star but here's some people that
21:06couldn't give less of a they have
21:09your best interest in heart and they're
21:11gonna tell you some things you need to
21:12hear so you can either find those things
21:14out because it's the immutable laws of
21:16physics you will find these things up by
21:18running your head straight into the wall
21:20without a helmet and that's gonna hurt a
21:22lot you might not even recover from the
21:23brain trauma or you can try and listen
21:26to some of the stuff they have actually
21:27learned like they're not sitting there
21:28because then there's no money in it it's
21:31because they want to help and then the
21:33final thing is I think you will be
21:37surprised I certainly was of how
21:40important some of the things that I had
21:41first just rejected almost in reactivity
21:45like the like what kinds of things till
21:49your brain would shooting because me
21:50mostly because I was probably afraid of
21:52what they were telling me you know yeah
21:54like tell you do something you don't
21:56know how to do yeah I have no experience
21:58in it it's scary and don't you know how
22:02look at me I'm growing faster than
22:03everyone else do you not understand how
22:05great I am like look at my people what
22:08we all did it was insane what we did
22:10have you ever grown a company this fast
22:12which most of them hadn't but that's
22:14irrelevant they had grown
22:16he's fast at their time and so the
22:18relevance is that you become all victim
22:21II and eco based when they start telling
22:24you that you need to think different but
22:26the reality is they're giving you really
22:28important insights for where you need to
22:30take your company and in most of the
22:32cases where there was churn around
22:33people geographical trouble pricing
22:36issues where you need to one big one
22:39that I thought I'd figured out forever
22:40was when we had to go to a big layoff in
22:42q3 of 2008 and the whole world was
22:45melting I thought I was all clever
22:47because I was out with customers and I
22:49went to a Boston office and one of my
22:51board members said no you need to be in
22:53the head office yeah it Hearst mostly
22:57because I thought I was the cultural
22:59leader that got that more than she did
23:00but she was right and I was wrong
23:03and I needed to get my ass on a plane
23:05back to the head office and face the
23:07music and I am so happy I did that I
23:10ended up walking out to people's cars
23:12with their boxes hugging them and I tell
23:15you that made me put in this position
23:16where I could rehire them later when we
23:18were doing well again but if I'd been in
23:21that Boston office sort of being the
23:22biggest mistake I made so you touched on
23:24something very interesting there which
23:26is your strength which was determination
23:32confidence will the power ended up being
23:36your issue which is all that led you to
23:41not want to take any advice even advice
23:43that would be very very valuable to you
23:46how did you learn how to listen and then
23:50how do you see that in entrepreneurs
23:52today where their great strengths can
23:55end up undermining all of their efforts
23:57so I learned it I think by running my
24:02head into the wall and getting some big
24:03cuts in my forehead and CEO CTE
24:10yeah and so I think you can even manage
24:12to ignore that because there's so many
24:14other great things because you're living
24:15in the best time ever and you have
24:16technology supporting you to get such
24:18turbo propellers into an opportunity
24:21that you really can't get in old
24:25industries and so it's very hard if you
24:26compare to what your alternatives are to
24:29that you are actually not doing as well
24:31as you can but once you begin to see
24:33that there's some decay and there are
24:35some issues when the company starts
24:37scaling then it becomes very natural to
24:39realize you need help another important
24:41thing I did was I got a coach and what's
24:44really great about a coach is that
24:45they're actually as safe a place in a
24:47way then a board is and it's not like
24:50we'll all I have an advisor that's not
24:51the same an advisor will cancel a
24:53meeting with you they have something
24:54else to do they won't be consistent even
24:56if they're your friend this is not your
24:58friend and you don't need friends here
25:00you need friends for other things you
25:01need somebody who has got business
25:02experience and who can actually talk
25:04truth to you around how they can start
25:06up with a 360 we were getting really
25:08input anonymously from the whole
25:09organization including the board but
25:11once you begin to realize the power of
25:13asking for help which was freely a hard
25:16place going to get you realized that now
25:18you are building a muscle structure you
25:21never even knew was possible you're
25:22running faster you're hitting the ball
25:24faster longer you're you're doing
25:26something you never you and I was able
25:28to do and so like inviting that
25:30crowd-sourced power of knowledge around
25:33people that care about your company it's
25:35the only way to get there I actually
25:37don't think you can get there all the
25:38way and certainly none of the potential
25:41that you would be able to if you don't
25:43tap into all these people and I think
25:45most people that have real success now
25:47you ask them they always have a bunch of
25:49people that they asked a lot of great
25:50questions all right well I'd like to
25:53thank Laura's for joining me as you
25:55heard from him as Michael Jackson said
25:57you are not alone this has been the a
26:0116z podcast thank you
