Delivering Low-Code, Cloud-First Automation at Scale: Tray.io Announces $40 Million in New Funding

Software has been around for a long time, and in many different forms. On the waves of cloud adoption and digital transformation, it’s more important than ever for companies to make technology accessible to their employees. Tray.io users in any department can use its automation platform to transform fragmented processes into powerful business outcomes.

I sat down recently with Tray co-founder and CEO Rich Waldron on “Founder Real Talk” to chat about his company’s latest $40 million Series C extension, product and growth plans, and more. You can listen here, and below is an excerpt of our conversation. Rich also appeared on the podcast back in 2019, and you can listen to that episode here.

This transcript has been edited for clarity.

Listen to this episode:

Glenn: It’s been awhile—looking back, contrast Tray in 2019 and how the company has evolved since then. Catch us up. 

Rich: Well, I’m delighted to say that we’re working on the same problem at least. Back in 2019, we had a perspective that the world was continuing to push toward the cloud. I don’t think we were rocket scientists for having that view. But the part that was interesting to us is that the challenges that would be felt by businesses would be within the line of business teams. All these folks buying more and more software, handling more and more data in real time, sort of independent of IT. 

Our original vision and our view was that building a platform that enables these teams would be not only extremely useful, but critical for businesses to scale. Given the way that we saw the world back then and, you know, as we think through what’s happened since that time, the world did completely flip on its head. 

The perspective that we held got accelerated very fast. Every company that was thinking about how they better integrate their stack, or how might they make better use of their data, suddenly had a cataclysmic event where they had to solve this problem almost instantaneously.

As a company, we had to grow up very fast. Our technology needed to scale extremely quickly. We saw just this explosion of users trying to tackle all these problems that they hadn’t gotten to before, as well as vendors trying to figure out how to navigate this new market, because the demands on them and what they supported natively out of the box changed very quickly as well. It seems like a very long time ago, and I’m really, really pleased with how companies have evolved, and how we’ve weathered quite a few of these storms as a group. 

Glenn: I’m pretty sure we didn’t predict a global pandemic back in the 2019 episode, but you guys were super well-positioned for it. You know, low-code no-code wasn’t a familiar term back then, but now it seems like every company or almost every software vendor we talk to claims to be low-code no code. Automation is also a word you hear more and more nowadays. Tell us a little bit more about what sets Tray apart from a product and solution standpoint. How is Tray differentiating in the market?  

Rich: You’re right, low-code no-code has become an almost default term for everything these days. And in the same vein, I think automation has really come to the fore as well. From Tray’s perspective, we were born out of the frustration that in the applications we use every day, all of the data was inaccessible unless we had a computer science degree, and the tools that were available existed from a different data center era where the real-time nature wasn’t as big a challenge. 

Because we saw that so many services were starting to be delivered by the cloud, we realized that the solutions were going to require a real-time nature to them. As we built our product, the priority was for users to have an amazing experience, that it should be accessible to a much broader segment of the market. It should be that anyone in any department can have access to benefit from the workflows that are created, or actually create it themselves. This flies in the face of the legacy iPaaS (Integration Platform as a Service) technology that would require an engineering team to build it, deploy it, manage it, and maintain it on an ongoing basis. And then you’d have the added insult of needing a third party to come along and maintain this thing for you on an ongoing basis. For us, having that initial experience was really critical. 

The second piece was that legacy vendors weren’t built for the kind of loads that we see today. At any given time, somebody can turn on a solution, which has access to a much broader audience. In response, we built scalability, resilience, and security into our platform. I think that’s the thing that really makes us stand out. Our customers and prospects are experiencing the power of automation during the sales process. It doesn’t take six months to implement this stuff and get value from it. We expect customers to be getting ROI from the day they sign their contract, because they’re already up to speed. 

Glenn: That’s awesome. Delivering value from Day One and riding the waves of cloud adoption and digital transformation seems to be like you’ve put Tray right in the middle of the perfect storm. How do you assess the market opportunity?  

Rich: It’s an enormous market; Gartner predicts that it’ll be a trillion-dollar market by 2025. Every analyst under the sun is holding their own perspective as to what automation or hyper-automation is bringing to the world. The view that we have is that to be a major player in any big market. You need to be able to find a series of repeatable ways that allow you to get into the right veins to scale as an organization. 

For us, we see that there is a huge opportunity that many vendors are not positioned to be able to take advantage of. We know there’s a huge technology moat to build, and we’ve taken an approach whereby we focus on solutions that get our customers up quickly. We’ve seen the kind of mid-market and enterprise customers adopting these at scale. They liaise closely amongst departments within their businesses, and that becomes the way in which we get the second or third order effects. 

The other thing is that we work very closely with other vendors, because they’re also under a great deal of strain. Their customer base is making a lot of noise about the integrations they expect these vendors to support out of the box. It becomes a pretty critical part of vendors’ ability to grow their own customer base, but also retain customers who start looking at other vendors when those integrations don’t exist at the time. Given that we’ve built so much of this technology under our platform, we allow vendors that we work with to harness that via our API, and they can build and stand up their own native integrations. We attack both ends of the market, from the perspective of how do I build solutions within teams that I can maintain myself and make my life easier, as well as enabling vendors to build a better native integration experience themselves. We feel that we’ve got two hands firmly wrapped around a really big opportunity. 

Glenn: Given the macro environment we’re living through right now, not many companies have been able to raise fresh equity capital. Tray is announcing $40 million in new money from new and existing investors, a testament to the success you guys are having. What do you think? How is the environment different this time around in raising money? 

Rich: It’s a completely different environment. Ultimately, this is a time where fundamentals have come right back, front and center. I think for most businesses, we’ve been in an amazing growth period where we’ve seen demand of the scale, and the cost of capital being extremely low. That’s played itself into company software budgets and this growth-at-all-costs mentality. But suddenly, we’re back to the good old-fashioned things that drive a business that you need to have in order to become a world-class scaled operation. The things that were beneficial to Tray certainly helped us in this environment. 

  • First, the market that we’re in is unquestionably large. 
  • Second, the value of our technology. Our tech has been helping to consolidate, helping customers grow during a time when the purse strings have been tightened. 
  • Lastly, not getting ahead of yourself, and making some of those investments before they paid off… 

I think on all three fronts, those are the things that put Tray in a strong position. 

This is also a time where who you raised money from in the past makes a pretty big difference. The venture market changed significantly over the last two years. We saw a whole bunch of new entrants. With GGV, it’s been a long-standing relationship; we’re sitting here talking about GGV’s multiple participations in Tray’s journey. Being on that path together and making those decisions early, thinking about who you’re going to go into business with—that shows up at times like this. For us going out and raising capital, we were fortunate enough to get a new great outside investor, but all of our existing investors also participated. When that happens, it sends the right signal to the market and it puts you in a great stead as a business overall. 

Glenn: I didn’t pay him to say that, folks. That was not rehearsed. Thank you, Rich. So, what are your plans now with the newest investment? What comes next? 

Rich: We will forever be on a product development journey. The moment that you stop innovating is the moment the music stops, and the market catches up with you. Continuing to invest heavily in R&D and continuing to ensure that we’ve got the right suite of low-code tools to support all the challenges that our customers face today is critical to our path forward, especially to larger enterprises. They’re also facing significant challenges in how they scale their own cloud environments. We’re looking at how we can continue to offer more strings to our bow to help those organizations scale quickly and not get caught in that sort of innovation death spiral. Secondarily, we’re really focused on the go-to-market execution and better packaging of our solutions. That’s something that’s top of mind for us. 

We will forever be on a product development journey. The moment that you stop innovating is the moment the music stops, and the market catches up with you.

Glenn: You’ve kind of touched on my last question a little bit. What is the Rich of three years from now going to be saying about Tray, about where you’ve gone and where you’re going? 

Rich: When we spoke back in 2019, we had a vision for the way that we hoped the world would go, and where we saw opportunity. We were beginning to see our product in the hands of customers who were talking about getting on an automation journey or starting to launch a few workflows between departments. Today, that’s front and center in every conversation. “Automation and Integration” is a slide in every board meeting that is happening across the technology sector right now.

As I look ahead at the areas that I’m most excited about, it’s continuing to drive a wrecking ball through the iPaaS market. We desperately want to save the market from legacy iPaaS. We want to get companies off these solutions that take them forever to get anything set up. In buying cloud solutions, the benefits that you get from instant access and scalability out of the box are significant. Seeing and hearing our customers talking about us in the market as an important integrator and ecosystem generator—those are the things that get me the most excited. We hear stories every day about people that achieve things that they didn’t think they could because they didn’t think they had the skill sets. I’m thrilled to be bringing that to life for our customers. We wouldn’t be here without them. I can’t wait to see where this company gets to. 

Listen to the full podcast episode on Founder Real Talk here.

8 Questions to Ask as a Startup Founder Before Signing a Term Sheet

Photo by Ashkan Forouzani on Unsplash

A version of this article originally appeared in Forbes.

People often ask me what traits I look for in founders. As I recently told GGV’s NextGen Fellows, the ability to be an incredibly fast learner is one of the key things that can set founders apart. 

It’s really hard to build a startup into a successful company, and the phases change so rapidly that nobody is born with or has all the requisite skills and experiences to achieve at every phase of growth. 

For a founder to be successful as a leader of a fast-growth company, she or he needs to recognize that their job will keep changing—at every phase, the job and what’s required changes. No one knows everything they need to know on Day One. And so you’ve got to be a really good learner.

That said, I also like to remind founders to consider these eight questions before they sign a term sheet.

It takes time to find the right VC partner

In general, founders shouldn’t settle for the first VC partner who offers a term sheet. Instead, focus on finding firms with a long-term vision that complements your own. After all, it takes a long time to build enduring companies—there really is no shortcut. 

Though the pace of innovation hasn’t changed, some investors’ strategies may end up shifting. For example, some seed-stage investors have been pushing to sell their positions as early as in the Series B round. When a firm you’re hoping will stick with you ends up selling early, it can be disruptive and put a lot of pressure on your company. Founders then face the burden of filling that hole as their existing investors retrench.

When choosing VC partners, ask yourself: 

  • How aligned are your objectives?
  • Does this firm have a long-term perspective on my sector?
  • How will they be able to help me scale as a founder?
  • Will they still have my back if we decide to pivot?

The bottom line: Building companies is a long-term game. Think twice about who your partners are, and find a VC partner who you have good synergy with. 

Not every dollar is equal in the VC landscape 

Founders will always be on the front lines of building their companies, but partnering with the right VC firm can help accelerate your chances of success. 

VCs can either roll up their sleeves—or just write a check. Some VCs will throw money at a company, and you’ll never hear from them again. Unfortunately, that model typically doesn’t set up a company for success.

Other VC firms can offer value beyond cash. From helping to recruit a go-to-market team to giving feedback and advice, a VC firm that’s all in can make a big difference for founding teams. You may be experts in building your product, but what you want is a firm that can pitch in (as needed) with other functions like recruiting, marketing, communications, data, and business development. 

When checking references for potential investors, ask a VC firm’s existing founders: 

  • What is this firm like to work with?
  • In what areas did you ask for help, and what were the results?
  • How did this VC act when things weren’t going as well as planned?
  • Would you work with this VC again on your next startup?

The bottom line: Look for a VC firm that can provide support in the areas you lack. Many firms now not only offer access to their investment team but also expertise from their operations and Platform Services teams. Like the pieces of a puzzle, you want to find the perfect founder-VC fit.

StarTree Raises $47 Million Series B Led by GGV Capital

Today, the StarTree team announced their $47 million Series B to accelerate adoption of real-time analytics for user-facing and large scale internal applications. I sat down with Co-founder and CEO Kishore Gopalakrishna to talk about the fascinating origins of StarTree and its underlying technology, Apache Pinot, as well as to discuss Kishore’s ambitions for the enterprise tech startup. Listen to our “Founder Real Talk” podcast episode below or here, or read below for an excerpt of the interview. 

This transcript has been edited for clarity.

Listen to this episode:

Glenn: Talk a bit about why you embarked on building this real-time user-facing analytics platform Pinot. What was the prompt for building it? 

Kishore: Before we embarked on this journey, analytics was really restricted to internal employees of the company. It was single-digit queries per second, most of the time. Where I really got excited with the capabilities with analytics was when we started to build this new product at LinkedIn called “Who Viewed My Profile.” This was literally providing analytics to hundreds of millions of members of LinkedIn, and it was a challenge that no one had really solved very well. 

Our first question was very simple: We just took an Elasticsearch solution built on Lucene, but built in-house, and we launched that. The product was successful. It actually took almost a thousand nodes to solve some of the initial queries. We had almost a thousand queries per second. And that’s when we realized that this was good from the product perspective, but infrastructure-wise, it was really expensive for us to operate and manage. 

Given the success, LinkedIn wanted to do a lot more with this feature and for pretty much for every vertical you can think of—such as companies, universities, jobs, and articles. And that’s kind of when we decided that we needed to take a step back and evaluate if this was even the right architecture. Was this even the right kind of system that we needed to have as a fundamental layer? 

That’s when we went back to the drawing board and built Apache Pinot from scratch. We went from a thousand nodes serving a thousand queries per second to 75 nodes solving 5,000 queries per second. This big improvement marked the start of this trend. And fast forward to today, we have 200,000 queries per second running for the 800 million members of LinkedIn, and almost a hundred applications. Everything that started with the simple “Who Viewed Your Profile” feature is now all over the place. Any number that you see on LinkedIn today is actually served by Apache Pinot. 

Glenn: I’ve learned more about Pinot and spoken to various members of your community. Some people describe it as magical. Did you think you were building magic when you were building Pinot? Why do you think they think that?

Kishore: It’s interesting to look at the most challenging dimensions in any analytical system. 

  • The first is really the freshness of the data—how soon can you get the insights on the data that you’re writing into the system?
  • And the second is definitely the latency of how fast you can query—how soon will the query response come back?
  • The third reading is the concurrency— how many users can actually use this system concurrently?

The challenge here is really the latency, because this is the thing which drastically impacts other dimensions. Being able to keep that latency as low as you go from batch to real-time, or from a single user to millions of users, is a huge challenge. Most systems are not capable of handling that. And that’s kind of why Pinot was built. There is no magic; it’s really a new concept we came up with. For most systems, it’s understood that you need to do a certain amount of work to answer a query, so the question has always been, “How can we make it work faster?” 

The common solution is column store or using more parallelism and nodes. We went a completely different direction. The question we asked was, “Why are we doing this work? Is it possible not to do this work?” And that’s where indexers come in. Instead of trying to do the work faster, we aimed to completely eliminate it or reduce it drastically. So we kind of went into indexes first. In Pinot, we have a ton of indexes that help us achieve data analytics for various use cases. It’s ultimately about reducing the work instead of trying to do work faster.

Glenn: Pinot was open-sourced in 2015 and entered the Apache Incubator in 2018, and has been really quickly adopted at some very big companies. What challenges have you seen big companies facing while adopting Pinot, and what have you been building as you’ve evolved to support larger companies? 

Kishore: Well, initially when we built Pinot, we only kept LinkedIn in mind. But we always knew about the scale for which we were trying to solve. The biggest challenge as we came out of LinkedIn is that the world had moved on from an on-prem world to the cloud world. For us, the biggest challenge was making Pinot cloud native. We had to make Pinot easy to run on Kubernetes and Docker, and also had to make it very simple and easy for developers to adopt and run. That was the first thing, and we invested very heavily in this early on. 

The second challenge was really the technologies Pinot had to integrate with. Pinot was already heavily integrated with Kafka (since Kafka originated at LinkedIn as well), then we had Hadoop and Arrow, which we used for compile time dependency. These technologies were very tightly woven together, so we had to decouple them. Because in the outside world, there were a lot more use cases like ProtoBuf, Thrift, Kinesis, EventHub, and Pulsar. All these things were and still are important for us to use as source streams. Ultimately, we introduced the concept of plugins so that we could extend Pinot to various different sources. This was well-regarded in the Pinot community as well. People started contributing a lot more connectors, such as Spark connector, BigQuery, and Snowflake. All these things were new sets of connectors that we could add on top of the existing ones. 

Glenn: Tell us a little about the decision you made to leave LinkedIn and to start a company around Pinot. What led you to take this step? 

Kishore: First of all, it was very, very hard for me to leave LinkedIn. I actually wrote an article on how hard it was, especially since I spent almost eight years there. It was an amazing place to work at. I think one of the reasons I left was that we really saw the potential of Pinot, and I wanted to make sure that it reached its potential beyond LinkedIn and a few other companies that had adopted it. We wanted to make Pinot easier and more accessible to the world, and we thought it was a great opportunity. I think that’s kind of why we had to create StarTree. Open sourcing it was great, but there was only so much we could do being at LinkedIn. We had to invest in the community: We’d been researching documentation, connectors, plugins, and we started to actually see the full potential. That’s what led us to create StarTree. 

Glenn: So you just raised your Series B. Congratulations! We’re very excited at GGV to be leading this round, and we’ve loved working with you so far. Obviously you don’t raise $47 million in a Series B—particularly in today’s environment—unless things are going quite well. To what do you attribute the success that you’ve seen so far in StarTree? 

Kishore: I would say two things—first and foremost, it’s the team. We’ve been very fortunate to have an amazing team, and I think everything else is secondary. Our team is really passionate about the problem that we’re solving and they love working with each other. That’s one of the biggest reasons why we have been able to deliver so many things in such a short time frame. We’ve built not only on the community side, but also on the product side.

The second thing is really the community; it’s been very helpful for us. We almost treat our community as product managers. They tell us exactly what is lacking in our product and what things we need to develop. For the first year and a half, the roadmap was completely based on the input that we got from the community. They have been very helpful in terms of shaping the product and making sure that Pinot is useful beyond its original purpose.

Glenn: Can you look into the crystal ball for us? Where do you see StarTree three to five years from now?

Kishore: I think it kind of goes back to our vision of needing to democratize data. When you say democratization of data, people mostly think about employees having access to data within their companies. I think we want to redefine their definition and say that it can go beyond that. Every customer and user should have access to data to make decisions. For example, if you look at what Uber Eats does, we now see restaurant owners getting analytics about popular meals and ordering windows in real time. So that’s a massive shift from where we were a decade ago. And that’s the change that we want to bring in. 

Listen to the full podcast episode on Founder Real Talk here.

GGV Leads $30M Series A1 in Neon: The Database for a Serverless World

CEO Nikita Shamgunov (right) with the full Neon team

Now that “every company is a technology company,” software development has become a high-stakes, winner-takes-all game. As a result, developers everywhere prefer flexible open source and API platforms that make it faster and easier to build and deploy top-quality applications.

On the front end, developers have moved en masse to serverless deployment and hosting platforms such as Vercel* and Netlify. However, up to this point, they’ve lacked the back-end platforms to match this innovation. Existing databases aren’t built cloud native and won’t scale to match the needs of modern, serverless web apps and websites.

That’s why GGV is so excited to be leading a $30 Series A1 investment in Neon, the world’s first truly serverless, multi-cloud, open-source database. Neon separates the storage and compute functions to create a truly affordable and compelling cloud native Postgres, the popular open-source database. 

Listen to Nikita on Glenn’s podcast, Founder Real Talk.

A dream team

Neon’s technology is impressive, but we don’t just invest in products—we invest in people. And the founders of Neon are a dream team. CEO Nikita Shamgunov is well-known for building amazing database products. His 20-year career includes being co-founder, CTO, CEO, and Chief Strategy Officer at SingleStore, a database for complex analytical and transactional workloads that he grew to over a $1B valuation, as well as stints as a database engineer at Microsoft and Facebook. Nikita’s co-founders, Stas Kelvich and Heikki Linnakangas, have been key contributors to Postgres. Nikita is already building a wider developer-focused team with deep engineering, product, and go-to-market experience.

Developers in the driver’s seat

Why does the world need Neon right now? Because application development is changing before our eyes. Companies in every sector—from finance and healthcare to manufacturing, transportation, and retail—are hiring legions of developers, trying to build killer apps to get ahead. It used to be that mostly tech companies hired large development teams, but now nearly every company must build and integrate software into the very fabric of their businesses.

With so much competition for their services, developers are in the driver’s seat, and they want to use tools that make their lives easier and their code better. Developers want collaborative, scalable platforms that help them quickly build and deploy applications, and these solutions are often open source, serverless, and API-based. 

On the front end, several such tools are already widely used, but on the back end, databases are often stuck in the old world of proprietary frameworks hosted on servers. Developers create nimble apps and websites, but then struggle to connect them to legacy databases. Neon’s serverless platform solves this bottleneck problem, leveraging Postgres to bring the best of modern front-end software development workflows to the database world. Neon empowers developers with global reach, performance at the edge, and an optimal user experience. 

Bottoms-up adoption

The real way to tell if a developer platform is a hit is simply to see if developers are using it and with Neon, all signs point to a continued surge in adoption. Since Neon launched in June, more than 5,000 developers have already signed up for the waitlist to access it, and it has exploded in popularity on GitHub. Developers are particularly excited for Neon’s unlimited branching capability, which brings the CI/CD workflows they love into the database world, and its lightning-fast startup time that gets new databases and branches up and running in under two seconds. Neon is capturing developer mindshare from the bottom up and has a real chance to become the default serverless Postgres database—ultimately displacing Oracle and other legacy databases in the world’s biggest enterprises.

We’ve been investing in enterprise software companies for over two decades, but we still get extremely excited when we see a new platform that’s breaking the mold and has the potential to transform how companies operate their tech stacks. Neon is one of those industry-changing technologies, and we’re thrilled to welcome Nikita and the entire Neon team to the GGV family!

*Represents a company in GGV’s portfolio

A version of this article originally appeared on LinkedIn.

How to Manage Your Startup Through Macro Uncertainty: Lessons From the Global Financial Crisis

A side-view mirror reflects a road
Photo by PAN XIAOZHEN on Unsplash

A version of this article originally appeared in Forbes.

If there’s anything that I’ve learned over two decades as an investor, it’s that hindsight is 20/20—and history has a way of repeating itself. 

I first met Bruce Felt in late 2006 when he joined a GGV portfolio company, SuccessFactors, as the chief financial officer. Bruce took the company public about a year later—just in time for the Global Financial Crisis (GFC). SuccessFactors weathered that storm, ultimately selling to SAP for $3.4 billion in early 2012. 

Given the macro uncertainty of the current environment, I recently asked Bruce—who is now the CFO of Domo, a cloud-based business management platform that went public in 2018 and has performed well with many quarters in a row of over 20% growth—to reflect on his experience with plummeting stock prices and layoffs during the GFC.

Bruce Felt, CFO of Domo, on Bridging the Gap Between Strategy and Execution

Below is a lightly edited and condensed version of our “Founder Real Talk” podcast episode, which covers four lessons that might still be relevant for startups today: 

Lesson #1: It takes time to convert skeptics into believers

Glenn: “Just a quick reminder for folks who may not be familiar—what did SuccessFactors do, and what was the growth profile of the company leading up to the IPO?”

Bruce: “In the most general sense, SuccessFactors was in the human capital management space with its starting point providing performance reviews in the cloud as the first offering. And that was the beginning of what turned out to be a large portfolio of products… such as goal setting, compensation, and compensation reviews [with] learning analytics on top of all that.”

Glenn: “So you go public. There’s a lot of excitement around the name. But [it was a] pre-SaaS world so concepts like retention rate and net dollar retention were not really well understood by public investors. And the skeptics—there were a lot of skeptics as I recall it—despite the fact that you guys were performing really well as a public company in those first several quarters out of the gate. And my recollection is the stock did not really perform all that well—[it] was not a up-into-the-right kind of story. It was kind of bumping along, maybe even a little down from that first day of trading price for the next year or so on average. Is that right? And what do you think the skeptics were worried about in your business?”

Bruce: “Well the problem with SaaS back then was it was still fresh, new, and certainly not understood. So most investors looked at the income statement, which looked quite terrible… And we were told this by investors, ‘Here we go. It’s the dotcom days again.’ … And I’ll tell you how that played out later—how we actually converted a lot of skeptics over time. But generally what I recall on the stock price, $10 jumps to $13 and works its way up to $15. We do a secondary. It kind of hangs in there and basically performs fine until the financial crisis hit. And then we got hammered: $4 to $5 a share. And it was very depressing.”

Glenn: “I can imagine.”

Bruce: “Well, we were doing nothing wrong, but we were getting slaughtered on the stock side.”

Glenn: “So one thing you did leading up to that, as I recall, was you guys put a line in the sand with investors and said, ‘Hey, look at the cash flow in our business… We’re going to turn cash flow positive by X date.’ Did that quell fears once you hit cash flow positive? Is there anything to learn from that? Companies today face a lot of skeptical investors as well.”

Bruce: “That helped a lot for sure, because once we got the cash flow positive, we were self-sustaining. There was no refinance or financing risk to run the business… But there were still those who said you’re not profitable, you’re not creating value even though we had positive cash flow. So the cynics were still there.”

Lesson #2: Know which macro signals to monitor

Glenn: “Did you see this coming with the GFC? Did it hit you guys like a hammer over the head? Or were you prepared? What actions did you take?”

Bruce: “Here’s the remarkable thing, and I think this is a good lesson for everybody. As we saw it coming—and we saw it coming via the newspaper—we didn’t see it in our business. And we would ask all sales management: ‘Give us the best case and the worst case.’ And generally speaking, the worst case was not so bad. And here is the hard call: We had to ignore them because it looked like there was serious carnage starting to gather at some of the biggest enterprises in the world. And even though the frontline sales force said we’re generally going to be okay, we literally did not believe it was prudent to rely on that. So we made the move and got prepared, assuming that it’s going to be much worse than what the sales guys were calling…

And we were right. So we really made the cut decisions based on the world around us, not by what was happening to our business.

Now having said that, we did go down to zero growth that quarter. Our curse was that bookings all came in the last three days of the quarter. So it was really pretty agonizing that we had to make significant cuts going into late December, our biggest time of the year, when we really didn’t know the answer, but we really paid attention to the world around us more than our own operations.”

Glenn: “If your headcount was X, what percent of the headcount did you end up reducing and roughly what percent of the spend did you take out of the company? And did you do it all kind of all at once?”

Bruce: “It was roughly 25%—we had sell-side analysts write it was 35%, which bothered us because that was too high—and about the same in total spending. What that ended up doing (and I didn’t realize the significance of this until later) is investors told us that drove us to GAAP profitability. And it proved everything we said about the model worked.”

Glenn: “So I want to just pick that apart for a second… I remember when news came out that you guys had done this dramatic cut. And then I assume that news came out before your Q4 was even done and certainly before you announced the results of Q4, the stock dropped to the $4-a-share range at its low. So it’s a pretty big drop and must’ve been brutal on the company. Meanwhile, you had taken out 25% of the heads in the company. And you’ve mentioned how investors actually saw it work. So were they expecting that you would lose your existing customer base pretty rapidly during this time frame? And how did you prove the skeptics wrong?”

Bruce: “Well, I think they appreciated the cuts more than anything. I don’t know that they really knew what to make out of it, but when we said we cut and we’re going to be profitable, that was extremely well-received. They did not yet know how this would literally play out. But we started to paint a picture that we are probably one of the most well-positioned companies to grow from that point on… We got credit for making the cuts. Then we tried to get as much credit as possible by stating very clearly, we were absolutely—from this point on—in a position to grow as soon as the market was allowing it and that we were one of the better bets in all of software. And we didn’t quite get credit then. But that was the beginning of the march to $40 a share.”

Lesson #3: To retain talent, showcase the upside 

Glenn: “Question about the mood in the company and how you manage things right when you take a big part of the company out—that’s got to be disruptive. So what was that like? You still have big producers and important people in the company you don’t want to lose who are watching the stock plummet. How do you make sure you retain your best people? And when did you realize, ‘Hey, we can start transitioning back to playing offense again and growing the company?’”

Bruce: “Well, first of all, there was nowhere for anybody to go. We had that working for us. But at the same time, we meant it when we said it: We think we’re extremely well-positioned to really execute well post the cuts. And so if you’re a rep who survived that—you really did see an incredible amount of upside, both in not only the stock but really in what that person could individually go get from customers… They even saw more opportunity with that many more uncovered or available accounts for them to go pursue and get business from.”

Lesson #4: Model worst-case scenarios—and act

Glenn: “What did you learn from that time in your life, and what might be relevant for others today? Anything you’d point to that you think history can repeat itself and people ought to know from your experience?”

Bruce: “I pulled out that playbook two weeks ago because could it happen again? Maybe so. Actually, I’ll take that back. I already pulled out the playbook and used it at Domo when COVID hit… What would happen if our top line followed the same trajectory that we saw in the financial crisis? We modeled that out. We were prepared to take action as if that were to happen. And preemptively before anything happened to our business, we didn’t go quite as deep. We took 12% out of demos. And that actually put us not GAAP profitable, but it put us [at] cash flow breakeven for the first time ever at Domo. And it was an eerily, eerily similar pattern. So we went public at $21, goes up to the thirties, bounce around at $15, and back in the twenties. Then this crisis happens. We’re at $8. Now fast forward to four or five, six years later—we’re at $95.”

Glenn: “Wow.”

Bruce: “So I pulled out the same playbook and really the stock did the exact same thing. And now we’re about to hit maybe financial crisis No. 2 in my life at Domo. And we’re doing the same thing. We’re running the scenarios. If this, then that. We’re not reading the newspapers, and we’re watching the leading indicator, lead gen, top-of-the- funnel metrics like a hawk. We’re asking every rep: ‘You hearing anything about macro in your accounts?’ So if anything, we’re even more aware and more sensitive. Yeah, it’s already lined up—we already have the whole management team [thinking]: If this, then that. We’re locked and loaded already.”

Glenn: “It’s a great history lesson, and history, as we know, repeats itself. So I really, really appreciate you sharing your thoughts with us and experiences from this moment.”

Read more: How to Stand the Test of Time as a Startup

Listen to more “Founder Real Talk” episodes

I was a board observer and led GGV’s investment in SuccessFactors in 2006 and 2007, where I helped advise the CEO and CFO through the IPO process and into life as a public company.

StarTree Raises $47 Million Series B Led by GGV Capital

Today, the StarTree team announced their $47 million Series B to accelerate adoption of real-time analytics for user-facing and large scale internal applications. I sat down with Co-founder and CEO Kishore Gopalakrishna to talk about the fascinating origins of StarTree and its underlying technology,Read More…

StarTree Raises $47 Million Series B Led by GGV Capital

Today, the StarTree team announced their $47 million Series B to accelerate adoption of real-time analytics for user-facing and large scale internal applications. I sat down with Co-founder and CEO Kishore Gopalakrishna to talk about the fascinating origins of StarTree and its underlying technology,Read More…

StarTree Raises $47 Million Series B Led by GGV Capital

Today, the StarTree team announced their $47 million Series B to accelerate adoption of real-time analytics for user-facing and large scale internal applications. I sat down with Co-founder and CEO Kishore Gopalakrishna to talk about the fascinating origins of StarTree and its underlying technology,Read More…