michelle zatlyn
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Your first sales hire should be a missionary, not a mercenary
Micah Smurthwaite is a partner at Next47 focusing on investments in enterprise software, infrastructure, cybersecurity and frontier technology companies.
As the first sales hire at Cloudflare, I learned firsthand from both our high growth and my own mistakes how to build a world-class sales team. Early hires are the cultural cornerstones of an organization. As Vinod Khosla described the initial hires at Sun Microsystems, “Initial hiring is way more important than you think because of its multiplicative effect. So, it’s worth taking a little longer when you hire those people.”
The first sales hire will set the best practices, cultural tone and is responsible for making sure each subsequent new sales hire succeeds. For this reason, it is important that startups look to hire missionaries, not mercenaries, when they bring on their first sales team member. If the first sales hire is a “coin-operated” mercenary whose priority is to overachieve quota and is a great solo player, they may be more competitive than collaborative. In contrast, if the first hire is a missionary who cares more about evangelizing the product and is a team player, they will naturally enable the next set of hires to succeed.
Hiring the missionary
There is an overwhelming amount of declarative advice on how to make your first sales hire: They should have experience selling at an early-stage company, tenure in that company to a much larger team (five to 50 employees, or $100,000 to $10 million ARR), they’ve sold at your price point, overachieved quota consistently (beware of this one. Quota overachievement can be a false positive and may be the result of a fruitful territory, a comp plan where quotas were too low or selfish “me-first” behavior.), etc. What you should look for are missionaries, and they exhibit two key qualities: resourceful ingenuity and team-based behavior.
Missionaries are resourceful team players
At early-stage startups, there is more work to do than people to do it. These are resource-constrained environments where roles go beyond job descriptions and are “jack-of-all-trades” positions. This first sales hire is not an ordinary sales gig. It requires a missionary with a deep interest in the technology who wants to evangelize the product. The resourceful missionary must have an enterprising mindset to build their own sales collateral, a clever approach for testing pricing, a passion for the product technology and an ability to navigate the organization so engineering and product teams can hear the voice of the customer.
While resourceful skills are needed to test out different sales motions, the most important quality the missionary must have is a team-first attitude to share those learnings with colleagues. As the missionary, and the subsequent missionary hires, are developing a repeatable process they are engaging in novel intellectual work; this is not routine execution. When someone develops better messaging, or discovers a new use case, the goal is to spread that expertise so overall collective intelligence and team performance increases. If that operational know-how becomes siloed and an individual optimizes for themselves, instead of the team, the organization loses.
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Cloudflare’s Michelle Zatlyn to discuss building a company with a bold idea at TechCrunch Disrupt
When you start a company, it can be tempting to keep it simple. You want something that investors and customers can easily understand. While it might be easier to go that route, that is not something that Cloudflare did when it launched a decade ago at TechCrunch Disrupt. Instead, the company decided to go big or go home, and went with the wild idea of building a faster and safer internet. Not too much pressure.
It launched in 2010 with a free product and a paid tier and grew that original notion of delivering speed and security into a suite of products and services. Today, a decade later, Cloudflare is a public company with a market cap of nearly $12 billion.
We are going to talk to company co-founder and chief operating officer Michelle Zatlyn in a one-on-one interview at TechCrunch Disrupt 2020 about what it took to build off that vision as an early stage company. They were going after established giants like Akamai at the time. They needed to build a network of data centers around the world, starting with five on three continents at launch.
None of this could have been easy from an operations perspective. They were offering the bold assertion that they could make the world’s websites faster and safer and do it in a way that didn’t require any additional hardware and software. As an early adherent to the notion of cloud computing, they were giving customers the ability to do things that up until that point were only in reach of the largest internet properties, selling a value proposition that is common today, but was pretty unusual at the time.
We’re going to ask Zatlyn how they built this early product, how they grew the product set and expanded their data center coverage to over 200 around the world and what it took do all that and eventually become a public company.
You can see this session on the Disrupt stage along with all the programming on the Extra Crunch stage, network with CrunchMatch and discover hundreds of early-stage companies in Digital Startup Alley with your Digital Pro Pass purchase for just $345. There are discounts available for students, government and nonprofit employees as well as a great offer for early-stage founders who want to exhibit in Digital Startup Alley. Get your pass today before prices increase!
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Hear Cloudflare and PlanGrid’s amazing journey from founding to exit at Disrupt 2020
How and when should startup founders think about the “exit”? It’s the perennial question in tech entrepreneurialism, but the hows and whens are questions to which there are a multitude of answers. For one thing, new founders often forget that the terms of the exit may not eventually be entirely in their control. There’s the board to think of, the strategic direction of the company, the first-in investors, the last-in. You name it. We’ll be chatting about this at Disrupt 2020.
Exits normally happen in only one of two ways: Either the startup gets acquired for enough money to give the investors a return or it grows big enough to list on the public markets. And it just so happens we have two perfect founders who will be able to unpack their own journeys on those two roads.
When Cloudflare went public last year it certainly wasn’t the end of its 10-year journey, and nor was it PlanGrid’s when it was acquired by Autodesk in 2018.
Cloudflare’s Michelle Zatlyn saw every nook and cranny of the company’s journey toward its IPO, which received a warm reception, even if there were a few bumps along the road leading up to it. What comes after an IPO and how do you even get there in the first place? Zatlyn will be laying it all out for us.
PlanGrid’s journey to acquisition by Autodesk was equally fascinating, and Tracy Young — who, as CEO and co-founder, shepherded the company to an $875 million exit — will be able to give us insight into what it’s like to dance with a potential acquirer, go through that (often fraught) process and come out the other side.
We’re excited to host this conversation at Disrupt 2020 and expect it to fill up quickly. Grab your pass before this Friday to save up to $300 on this session and more.
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Why CEOs should spend up to half their time recruiting
Hiring the right people may be the most important thing you do when you start a new company. But how much time should founders spend on hiring when there are so many other competing demands?
Last week, we discussed team-building and several other issues during a panel on the Extra Crunch stage at Disrupt Berlin with Cloudflare CEO Matthew Prince and Red Points CEO Laura Urquizu.
“I was looking through early emails the other day,” said Prince . “I had forgotten how hard it was to hire people in the very beginning. I think that [Cloudflare co-founder] Michelle [Zatlyn] and I spent probably at least 70% of our time in the first two years just begging people to work for us.”
While it’s a hard job to get right, Prince said he didn’t believe that this was a job he should have outsourced to recruiters. “Fundamentally, as the founder and leader of an organization, your job is to attract and retain the best best possible people,” Prince argued. “And so even to this day, at least a third of my time is spent on recruiting.”
Red Points co-founder Urquizu agreed, noting that she also spends at least a third of her time on recruiting. But she also argued that as you grow as a company, your needs may change and you may need to let some people go.
“I usually say that what brought us here is not going to bring us to the next stage — and that includes people,” she said. “It’s not pleasant and it is very hard when you have to say ‘bye’ to people that have been with you in the journey for two years, or for one year, or three years, but then you need to find the next people that are gonna come along with you in the next stage.”
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Cloudflare co-founder Michelle Zatlyn on the company’s IPO today, its unique dual class structure, and what’s next
Shares of Cloudflare rose 20% today in its first day of trading on the public market, opening trading at $18 after it priced its IPO at $15 a share yesterday and holding steady through the day.
Put another way, the performance of the nine-year-old company — which provides cloud-based network services to enterprises — was relatively undramatic as these things go. That’s a good thing, given that first-day “pops” often signal that a company has left money on the table. Indeed, Cloudflare had initially indicated that its shares would be priced between $10 and $12, before adjusting the price upward, which suggests its underwriters, led by Goldman Sachs, fairly accurately gauged demand for the offering.
Of course, it was still a very big day for Cloudlfare’s 1,069 employees and especially for Cloudflare’s founders Matthew Prince, its CEO, and Michelle Zatlyn, its COO. We talked with Zatlyn today in the hours after the duo rang the opening bell to ask about the experience, and how the IPO impacts the company going forward. Our chat has been edited lightly for length and clarity.
TC: Thanks for making time for us on a busy day.
MZ: Of course! [TechCrunch’s] Battlefield [competition, in which Cloudflare competed in 2011] is such an integral part of our funding story. Thank you for giving us the stage to launch our company.
TC: Did you get any sleep last night?
MZ: I was so exhausted that I got a great night’s sleep. This whole process has been so incredible, so special. I didn’t know what to expect, and it’s been way better than I could have imagined. There are 150 of our teammates, early employees, family members, board members, champions and other friends here with us [in New York at the NYSE]. We also live-streamed [our debut] to our offices around the world so they could share this moment with us.
TC: How are you feeling about today? The stock is up 20%. There’s always banter afterward about whether a listing was priced right, whether any money was left on the table.
MZ: At this point, we’ve raised almost a billion dollars between today and all of the money we’ve raised from venture investors. We have a great team. We’re really happy. The markets are going to react how they react, but it’s part of our DNA to provide more value than we capture. We think that’s the way to build an enduring company.
TC: You have a liquid currency now. Do you imagine Cloudflare might become more acquisitive as a public company?
MZ: We’ve done some acquisitions on the smaller side and of course, we have a team that’s always looking at different opportunities. But we’re really engineering-driven, and we think we have many products and services left to build, so we’ll continue to invest in our products and in R&D development, as well as in our customer relationships.
TC: Retaining employees is a challenge that some newly public companies worry about. How will you address this in the coming days and months as lock-up periods expire?
MZ: I’m so proud of where we are today and of our whole team, and we’re just getting started. [Matthew and I will] show up Monday morning and get back to work and so will our employees, because they want to make the company [an even greater business].
TC: The company went public with a dual-class structure that gives not just management but all employees 10 times the voting rights of the shares sold to the public. Why was this structure important to Cloudflare, and did it give investors pause?
MZ: There are more than 1,000 people around the world who are building the product and working with customers, and we think it’s important for them to have that 10:1 structure, so it’s something we put in place a few years ago with the encouragement of some of our earlier investors.
TC: Were you modeling this after another company? Is there a precedent for it?
MZ: I don’t know of another one — there may be — but we weren’t inspired by another company. We just felt passionately about this being the right corporate structure and [I don’t think it was harder for us to tell the story of Cloudflare because of it]. Over the last two weeks, in talking with investors across the world, it wasn’t in the top 10 topics that came up, so I think we did a good job of describing it in our S-1.
TC: What was the roadshow like? What surprised you most?
MZ: Don’t get me wrong, there’s a ton of work involved from all kinds of people, in finance, our legal teams … But roadshows have a bad rap in that people think they’re grueling and that, by the end, you’ll be exhausted. That was my expectation. But it was really fun. It was a huge privilege to represent Cloudflare to all these investors who were incredibly smart and well-prepared. We traveled all over and people told us ‘You look better than most teams.’
TC: Where does one go for these roadshows?
MZ: You have the usual suspects; there’s a travel roadshow circuit, with some variations based on people’s vacation schedules, but New York, San Francisco, Boston, Chicago, Baltimore is common, Kansas City, Indianapolis, Toronto. You go in person to some places and in others, people dial in. But the whole thing gave me new insight into these pools of capital after venture capital. It was really interesting.
TC: Cloudflare said in a recent amendment to its S-1 that it was in touch with the U.S. Treasury’s Office of Foreign Assets Control back in May after determining that its products were used by individuals and entities that have been blacklisted by the U.S. Did this new revelation slow anything down?
MZ: There was no impact. Your group of advisors expands when you go through a public offering, and lawyers dot every ‘i’ and cross every ‘t,’ and you become a better company for it.
We deliver cybersecurity solutions that are made broadly available to businesses, entrepreneurs and nonprofits, and that’s incredible, but there are also some unsavory actors online, and we’ve always been a transparent organization [about having to grapple with this].
TC: How will Cloudflare handle requests for service by embargoed and restricted entities going forward? As a public company, does that process change in any way?
MZ: We have a really good process today. I think people think that we let anyone use Cloudflare and that’s it. But if customers are breaking the law, we remove them from our network and that’s not new and we publish transparency reports on it.
Sometimes, [you’re confronting] things that aren’t illegal but they’re gross, and the question is whose job is it to take it offline. But I work with some of the smartest minds on this and we try to be very transparent about how we figure this out. The conversation is so much better than it was a few years ago, too, with policy makers and academics and the business community engaging on this. People around the world are talking about where the lines can be drawn, but these are tricky, heady conversations.
TC: They certainly put Cloudflare in a precarious spot sometimes, as when the company banned the internet forum 8chan earlier this year after it was learned that the site was used by a gunman to post an anti-immigration rant. Can we expect that Cloudflare will continue to make decisions like this on a case-by-case basis?
MZ: Freedom of speech is such a fundamental part of this nation. Citizens should want the lawmakers to decide what the law should be, and if lawmakers could do this, it would be much better. On the other side, these are new issues that are arising so we shouldn’t rush. Lots of opinions need to be weighed and conversations are much further along than they once were, but there’s still work to be done, and Cloudflare is one [participant] in a much broader conversation.
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CloudFlare Hints IPO Coud Be Coming, But Not This Year
Just this morning, CloudFlare announced a $110 million round led by Fidelity Investments, and on stage today at TechCrunch Disrupt, Michelle Zatlyn, CloudFlare’s head of customer experience, told TechCrunch’s Frederic Lardinois the company definitely won’t be IPOing this year — but she hinted that it’s out there on the horizon. When a big round is led by… Read More
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