# Scaling ServiceNow to $5BN in ARR Leadership Lessons from Doug Leone, Frank Slootman and Bill McDermott · VC Value Add: Is it Real and Why the Worst VCs are "Seagull VCs" 20VC · Sep 11, 2024 · 66 min · 13,643 words Speakers: David Schneider, Harry Stebbings Source: https://www.996.fm/episodes/20vc--ep-b13ef546/ ## Cold open **David Schneider** [0:00]: People buy product for three reasons. They either buy it because it's gonna help them make money. They buy a product because it's gonna save them money, or it's gonna keep them off the front page of a newspaper. There are VCs that are seagulls, fly into a meeting, fly into a location. They basically take a shit and they fly away. When you're interviewing potential board members, look for relevant experience. Not the fact that they've been on eight other SaaS boards, but have they ever done anything themselves? **Unknown** [0:26]: This is 20 VC ## Intro **Unknown** [0:27]: with me, Harry Stebbings, and our guest today is one of the greatest operators of the last thirty years, David Schneider. David scaled ServiceNow to over a $100,000,000,000 market cap and from a $100,000,000 in revenue to $5,000,000,000 in revenue. Before ServiceNow, David was at Data Domain where he joined at $0 revenue and scaled to a billion in revenue and an IPO and an acquisition. Today, he is a general partner at Coatue. But before we dive in today, ## Sponsor read **Unknown** [0:55]: all of you listening use tons of software every day. Sometimes it fills us with rage. You can't figure something out. The chatbot in the bottom right is useless. You keep getting bombarded with these useless pop ups. And for those of you who build products, no one wants their product to feel like this. 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You have now **Harry Stebbings** [3:38]: arrived at your destination. ## Conversation **Harry Stebbings** [3:40]: David, I am so excited for this. I mean, I spoke to so many great mutual friends beforehand. Doug Leone said many wonderful things, which is always wonderful to hear. Thank So you so much for joining me today. **David Schneider** [3:50]: Oh, it's absolutely great to be here. I've been listening to the podcast, and I feel like listening to your podcast was part of my education in becoming a better investor. So thank you for doing what you're doing, it's just great to be **Harry Stebbings** [4:02]: Do know what? It's the British accent. I get an extra 10 points on the IQ scale just with that, but I'm thrilled that you like it. I do wanna start there because you have literally, I think, the most impressive operating career that I've had on the show definitely for a long time. So when we look at the operating career, what are the single biggest achievements to you that you say to founders as, hey, I did this in my operating career? **David Schneider** [4:25]: Well, thank you. It was a thirty plus year operating career. So in that thirty years, there were some some tough years and some good years. But the two things that kind of stand out, I spent almost nine years at a company called Data Domain where I joined at $0 in revenue. And by the time I left, we'd gone through an IPO, took it to about a billion dollars, and then we got acquired by EMC and a hostile acquisition in 2009. Whole story about hostile acquisitions if you ever wanna get into that. And then the next one is I spent ten years at ServiceNow, joining Frank Slootman again, who I had the privilege of working with at Data Domain, into that company, which was about 80,000,000 or so in size when I joined. And when I left, it was 5,000,000,000 in revenue and felt like job was well done to make that happen. **Harry Stebbings** [5:12]: Again, we have schedules, we kind of ignore them actually when it comes to it. When you look at that journey, that was a phenomenally successful journey. What were your biggest takeaways when you look back now with the benefit of hindsight? **David Schneider** [5:22]: Well, I think the first part of that journey that was so important is the first year we didn't have the right product. We had an initial product that I almost would refer to as a paid for beta. We knew it had some of the features and elements of what the customers needed. And we were talking about the product in a way as a backup appliance. And very quickly after talking to customers, they're like, It's not about the backup guys, it's about the recovery. And so we got really good at finding the first use cases where we could be effective every time. And so the other thing we did is it was simple to integrate into existing technologies. We didn't force customers to change their environment. We just plugged right into their existing backup software. Simple does win in technology a lot of times, and people need to keep that in mind. **Harry Stebbings** [6:05]: One question I always ask when I'm investing today is when we're analyzing how a company can integrate a tool into their existing stack is, are we adding a line, like, a line item on the budget, or are we actually removing one? How important do you think being able to answer that succinctly is? And is it a problem if you are adding one now? **David Schneider** [6:23]: I think anytime you bring a new solution forward in an enterprise, anybody who's bringing something in today has to be asked, what are we taking out of the budget? What are we replacing? How is this augmenting? How is it gonna make our world better? What I always try to tell my team, my whole team, the engineering team, the product team, is people buy product for three reasons. They either buy it because it's gonna help them make money, they buy a product because it's gonna save them money, or it's gonna keep them off the front page of a newspaper, which is usually what security products are being bought and sold for. That's the reason why. So you gotta show them how they're make money, save money, and that's really important. **Harry Stebbings** [7:00]: You know what I always get when I'm on boards? Yeah. You know what? We had this, but it got pushed to next quarter. It got pushed to next quarter. How do you think about instilling that urgency in any of those three? Because urgency, I guess, is important in all of them. **David Schneider** [7:13]: The common refrain, we had the sponsor, it just got pushed. That's really a discussion around was the value of my solution worthwhile for them to make the choice for us, or with some other solution that was being proposed, not even if it was competitive to us, but another thing in the company that was being worked on. There's only so many projects somebody can run at once and so many dollars to go solve the problem. So basically the seller's job is to make sure that the value that you're providing is well understood. We adopted a sales methodology at ServiceNow that featured this, where we had joint value discussions, and we called it a value prompter, that we did with our customers so that when it was time to go up to the CIO or CEO for $510 20,000,000 worth of funding, that they knew what the business case was and it held true. Because deals that slip at the end of the quarter are the nightmares, the bane of your existence if you're the management team or board. And after a while, you lose faith in your sales leadership about their ability to guide the business. And so my job always was be able to call the number ninety to one hundred and eighty days in advance, plus or minus 3%. So if you can do that reliably, you can keep your job as a CRO, but more importantly, you know how to guide the business, who to hire, where to hire, how to allocate resources as an executive team on building out a company. **Harry Stebbings** [8:31]: When we go back to those three, save money, make money, or keep you out of prison, at an investor stage, do you have a preference for one of them? **David Schneider** [8:39]: I don't. I just want you to be able to answer the question. Are many founders able to? No. Not until we start asking. Now the best founders, the ones that I really get excited to work with, are the ones that have clarity of thinking about that process. **Harry Stebbings** [8:53]: Do you know what I hate in investing? It's competition. And the amount of people that are like, You know what? We can help you make more money because we deliver you more leads, we allow you to interact better with leads, whatever it is, like sales analytics solutions, you name it. And I hate competition. How do you feel about competition when investing, having won in intensely competitive markets? **David Schneider** [9:15]: I think in any market that's worth going after, there's going to be some competition, especially in the enterprise space. The secret for me was it was easier for me to unlock dollars from existing known spend areas than it was for me to create a new spend category and create new budgets that didn't exist before. So if I could show more efficiency or better mousetrap type things, I was gonna win more deals faster in those situations. Now the thing about competition is not all competitors are created equal, Harry. Imagine this is the backdrop. You're at ServiceNow in 2011. The transition to the cloud is happening. The market is starting to give signals that everybody wants to move to the cloud. The two companies we were competing with were BMC and HP Software. Two companies that quite honestly were dead already in my book. All they were trying to do is take money out of revenue stream and drop to the bottom line. They weren't focused on the customer anymore. So now all of a sudden we have this new idea, same kind of product, but just a lot fresher in a cloud. And I unleashed the hounds of hell of an incredible go to market team at the same time, and I just decimate a market that they existed in. Decimate. That's the fun part about competition because if you have singular purpose and you know what you're trying to do, you can have a lot of fun blowing up other organizations. **Harry Stebbings** [10:37]: Have you ever had a time I'm sure, but, like, when was a time when your GTM team was not crushing, when it was just not decimating? And for the many founders in that position now, how do you rejuvenate them when that is a palpable feeling? **David Schneider** [10:52]: Most of my team would be crushing, partially because there's a way to get them to be effective. This is gonna go into the how do I build a company and The how do I think about way you get sales teams going is you identify what your target customer is, the ICP, okay? So know where you need to play. Know what the issues are that they're facing. Listen to the other customers who are already using your product. Use those stories to tell the stories about transformation, difference making, etcetera, to the other prospects you're working on. Teach your sellers those stories, the playbooks, and we'll talk about playbooks. What do I say? Who do I say it to? What's the profile of the customer that we wanna go after? What's the likely objection they're gonna give us and how do we overcome it? All of that's inside of the realm of possibility for training and onboarding for my go to market team. Then I gotta hire a bunch of people that just have to want it a lot more than everybody else. I look for people with a chip on their shoulder. I look for people that have something to prove, where the best days are in front of them. I called it at Data Domain, the land of the misfit toys. I wanted people that didn't fit in normal places because I wanted to give them a home where they could do incredible things and be welcome and supported. So give them the training, give them the playbooks, give them the stories, then hire people that really, really care, that are hungry to change. Are there **Harry Stebbings** [12:13]: backgrounds which make salespeople more likely to be great? For example, I actually like it when you find competitive athletes who turn into sports reps in sales reps or salespeople. They can endure great pain for long periods of time for delayed gratification. Is there a background that you found to be commonly very valuable? **David Schneider** [12:34]: One of my first and most important questions when meeting someone is I ask people, tell me something that you're proud of that you had to work really hard for. I'm looking for where they had to dig down and make something important happen. You tend to find a pattern with people. If they've had to overcome something, and I also say we're all survivors of something, just pick your something. And what I wanna know is what did they have to get through to get where they are now? What makes them tick? **Harry Stebbings** [13:01]: How do you feel about transparency as a leader? I know I know we had this beautiful schedule, but I'm loving this. How do you feel about transparency as a leader? We're often told about it being so important. But then there's this question of you do need to sometimes keep morale up artificially. You can't always say the truth. How do you feel about that? **David Schneider** [13:19]: I think people know the truth. And so you're almost better off addressing any issue, strength and weakness, head on. There are also lots of ideas inside of a company. And what I tried to do is almost reverse the pyramid of how organizations would think about it. Know, some people say everything's top down. I don't agree with that. I think we have a strategy or we have a vision of what we should go do. But then I look for the people closest to the customer, closest to the problem, closest to the technology to say, How would we solve it? And if you can empower those people down below, they're gonna bring their best self to work on a regular, and you're gonna get a lot more ideas trying to solve the tough problem. **Harry Stebbings** [13:58]: How do you empower them? Bring them to the meetings? Allow for idea generation in a new way? What is the right way to empower them? **David Schneider** [14:05]: I could think of a couple specific situations where we were dealing with a customer opportunity that's at ServiceNow, and one of my sales engineers said, I'm working on something where it is ticketing, very similar to what we did for IT service management, but they wanna use us for HR. And we don't really have that product. I said, Well, let's work with them because this may be a really interesting use case. We basically put this SE in charge of listening to the customer and demoing back what he'd heard, not through engineering yet. This was just a proof of value kind of experience. And this gentleman, Eric Hemmer, still remember his name, was so important in gestation and building of the understanding of what the idea was. We then took that to like three or four other customers and we showed it to our engineering team. All those customers got really excited about it. We brought it back to engineering and said, We'd like us to build something on the platform, which already does 99% of this. We just need to relabel some things. That's probably a billion dollar product now inside of ServiceNow because we just listen to customers. And that was Eric who was close to that problem, who listened and said, I've got an idea. Can I go forward? And we were just smart enough to listen. **Harry Stebbings** [15:18]: The numbers with ServiceNow are quite mind boggling. Did you know it would be as big as it is, or do you agree with the common statement that we always underestimate the size of our winners? Boy, **David Schneider** [15:31]: I wish I would have known it was as big as it is. When I got there, it was far from a perfect story. You got **Harry Stebbings** [15:39]: there at 50,000,000 an ARR? **David Schneider** [15:40]: It was a little bigger, about $8,090,000,000. And Fred Luddy, who was the founder, great human being, one of the most special founders I've ever met and worked with. He's Why? Brought Yes. He said, I'm making up for all the sins of my past by building this other thing, which I love that story. I love repeat founders solving a similar problem just with a better approach. You'll find that as a theme of mine when I make investments. **Harry Stebbings** [16:03]: Is that tough for you as a GTM leader though, when you have, like, customer demand through the roof? You can sell, sell, sell, but actually there's technical debt, there's infrastructure problems, and you have to be tempered in your decimation approach. **David Schneider** [16:15]: Not really. I'm a believer that if I'm with the right CEO and the right founding team and the right executive team, that we can be flying the airplane to Japan from San Francisco and doing maintenance on the engines at the same time. And that's what we had to do at ServiceNow. So every once in a while, things were a little bit crazy, but we got through it. And you can't take your foot off the accelerator or somebody else is gonna catch you. So even as uncomfortable as that was, we had to go do the maintenance on the airplane while flying it. **Harry Stebbings** [16:45]: Is speed the most important thing in those early days? **David Schneider** [16:48]: Speed is definitely one of the most important things. Speed of decisioning, speed of getting people answers to questions, speed of deciding what's important and then focusing on what's important, really, really important. I think people try to make a perfect decision. By the time you make a perfect decision, it's actually gonna be the wrong decision because the issue's already changed. **Harry Stebbings** [17:06]: So I spoke to 12 people before this show. A seven or eight said your biggest strength was your speed of decision making and clarity of decision making. Is there a decision that you made that with the benefit of hindsight, you wish you'd taken longer to make it? **David Schneider** [17:20]: Yeah. I think one of the pieces of feedback I got at one point is get at least two points of data before making a decision. I sometimes was such in a rush, and I worked for a guy, Frank Slootman, who is famously saying, Hey, you need to compress cycles every day. Let's make a decision. If it's the wrong decision, we'll fix it. **Harry Stebbings** [17:38]: What was the biggest one you got wrong? **David Schneider** [17:40]: I think we made a hiring decision at one point. We got convinced that we needed to go outside of the company for a senior go to market leader because we hadn't seen some of the things that we wanted to see. We didn't know how to do certain things. Brought a gentleman in, I wanna protect the innocent or not, but not **Harry Stebbings** [17:58]: name and shape. **David Schneider** [17:59]: Yeah, but I won't say the person. But we brought a person in, and he was just the wrong cultural fit. And we were so used to being 105% to 120% of our number. And when we called a number, we were over it all the time. And the company it came from, were used to missing their numbers. And no one ever got fired for missing their numbers. With us, if you didn't make your number, you were not long for the job. If you're missing your number at the end of the quarter, tell them you're gonna do something and then miss, that's unacceptable. And so I have to be able to, in my role when I was president and CRO at ServiceNow, is to be able to look at the CFO and the CEO and say, I've got this, we can plan the number for the next six to twelve months and hit it. Right? That's what I have to be able to do. And so if I had somebody on my team that was not able to execute there, that was a problem. **Harry Stebbings** [18:45]: I'm so enjoying this. You said there about kind of bringing someone in versus hiring internally or promoting internally. It is one of the biggest problems for many founders of when to do that versus when not to. How do you advise them? **David Schneider** [18:56]: It's a special place in my heart on this issue. On my journey at Data Domain, there was a moment in time where Frank could have brought in somebody else to run sales. Our first year was $3,000,000 goal, I did 2.97, I missed, right? 2.97 is three. That to me is as big a miss as if I would've only done one and a half. That was a miss. The next year we were gonna do $9,000,000. And they were getting nervous. Like, was I the right guy or not? And it was not apparent to me that even I thought I was the right guy, but I was gonna go convince them I was. Well, lucky for me, instead of doing 9,000,000 that year, we did 15, and then we did 45. So by the time they figured out I may not be the right guy, we'd already blown through that issue and they kept me. But Frank made the decision is, I'm gonna ride this horse. He's got the energy, the intelligence, the willpower, the fear of failure that we need to drive this company forward. And whatever he doesn't know, we'll get mentoring for, we'll get coaching for, but the good outweighs the bad by a long shot. And so for me, it was that opportunity. So when I look at the young people in that role today, I'm rooting for them. I want them to be successful. So every board I join and I see the CRO or the VP of marketing, I wanna take them under my wing and mentor them so they can achieve their potential and not get swapped out. So my whole goal is get these people to their potential, the CEO to the potential, the company to the potential, and the individuals on the journey to their potential. **Harry Stebbings** [20:27]: My challenge is I do not think young people want to work like they used to or want to sacrifice like they used to. There are very few that do, and they tend to be founders, but I find that number is less. **David Schneider** [20:39]: I disagree with you completely. I think there are certain founders that also don't wanna work that hard. I think there are people that are misguided on that. I think there are people that know they'll never be a founder, guys like me, I would never ever be a founder. But boy, my job was to put I use analogies a lot. So I viewed founders and engineering team, they were the artists. They're building this incredible product. It's like artwork. And the analogy I use is, remember when you were young and you bring your artwork home from your kindergarten class and you'd go, Mom, look at this. And if on a good day she'd put it up on your refrigerator, how'd that make you feel? My job is to put the artwork of these engineers on every refrigerator in the world. That's my job. I need to go find people that view that, not as a founder, but a partner to that founder, that see that burden, that opportunity, the privilege of doing that as something that they wanna do. And I think there are people out there that wanna work that hard. **Harry Stebbings** [21:35]: 80,000,000, 90,000,000, give or take, when you came to ServiceNow to 5,000,000,000. Yeah. Anything that we haven't mentioned that you think is crucial in really enabling that successful revenue scaling? **David Schneider** [21:47]: When I joined, they had about 16 reps. And if you look at just sales capacity, that meant the capacity they had at about a million and $0.5 a rep was about roughly less than $30,000,000. The goal for that next year was a $100,000,000 of new business. I had $30,000,000 of capacity going into it. I hired 150 people in less ninety days, and we did the $100,000,000. **Harry Stebbings** [22:10]: And how did you ramp them so effectively and so quickly? **David Schneider** [22:13]: What happened was there was market pull for the technology. There was definitely a receptiveness to it. We had probably underserved the profile of potential customers. We probably didn't have enough people on the street. So there was some pent up demand for us. One of the things we did is we changed our pricing as well. So I got rid of some of the discounting modes that we were dealing with. We basically doubled street price in that first quarter, which helped us double the revenue for that first quarter. And because I had gone to that user conference and I was watching the feedback from these customers giving massive standing ovations to the founder, telling me this was the best technology they've ever purchased, I had a lot of confidence in the value of the product against the problems we were solving. **Harry Stebbings** [22:57]: What opportunity did you not take that you wish you had taken? **David Schneider** [23:00]: If I go back in ServiceNow, we knew that we wanna take that company public in a year and a half to two years after getting there. That was just our mode of thinking. Like, our job was get liquidity for investors, take this company public, get it out in the public market so that customers would have visibility and understanding of who we were, what our financials looked like. We wouldn't be portrayed as some small little Silicon Valley startup or San Diego based startup anymore. We wanted to be a public company. **Harry Stebbings** [23:26]: Did you have a revenue goal in mind for what you needed to do or get to to be public? **David Schneider** [23:30]: Absolutely, day one. Well, that first year, getting $200,000,000 from 100,000,000 was very important on that goal. And it really came down to two last deals at the end of a Q1 twenty oh, goodness, what year was it? 2012 that I was working on that we got over the line that allowed us to hit the button to file our IPO. And then we had to prove that we had visibility of the pipelines so that you wouldn't miss for the next four to eight quarters after you go public. **Harry Stebbings** [24:01]: What did you go out at price wise? I think **David Schneider** [24:03]: it was $18 a share. **Harry Stebbings** [24:05]: Which is market cap? Couple billion dollars. Couple of billion. **David Schneider** [24:08]: And today it's 170,000,000,000. And by the way, during that IPO process, we had Gartner show up at a lot of the investor pitches and say, the size of the ITSM market is gonna be capped out at a billion dollars. We don't see the growth potential for ServiceNow. That was Gartner. It was one of the reasons we hated Gartner for a while at ServiceNow, but that was a real big blow, and we had to talk our way out of something. And now that business is much, much bigger than a billion. **Harry Stebbings** [24:35]: Given that, how do you think about analyzing market sizes in investors today? As you said, we don't see a pathway out over a billion. Gartner specialize in market sizing. How much focus do you put on market size today when investing? **David Schneider** [24:46]: I put a lot of focus on how big the market is, but I also don't think it's easy to understand when it's going from an on prem world to in the cloud world. And as it becomes easier, and anytime you make technology easier for the customer, the markets grow. And so I think that there's some value in understanding, if I can consumerize something that was really difficult before, does that make the market grow? **Harry Stebbings** [25:10]: How important is market timing for you in investing? You mentioned there the speed to IPO and what you wanted to do. You have to hit the market just at the right time for that to be possible. For you investing today, how do you think about that? **David Schneider** [25:21]: It's true. You can be too early in markets, and it's hard to know, right, when you're too early till you make the investment. I think **Harry Stebbings** [25:28]: Marc Andreessen says there's no such thing as time, bad idea, only a bad time. **David Schneider** [25:33]: Yeah. I think the pain from the existing strategy has to be understood. If you don't know what you're solving for, when I'm listening to founders, they're like, here's the reason why now is the time for x, y, or z to be successful. I'm gonna then go validate that in our research calls with external parties to try to make sure at the right time. **Harry Stebbings** [25:53]: Does being a sales leader help you on your referencing for companies? Because you are, as a sales leader, probably the most attuned to people, to listening, to knowing what question to ask. It's a real art form. Does being a sales leader help you do the best diligence and reference process? **David Schneider** [26:09]: And there's an art of discovery that is what we call it in sales, where you get into a conversation with a customer and you start asking questions. And that question then leads to another statement, which then you can probe around and is a natural conversation like this interview is between two new friends. And we have that discourse. So as I talk to them, I'll be like, Okay, well, what do you think about this? Why is this important? How would you sell it internally? What would you be taking out to be able to afford it? Things like that become really interesting to me as I'm doing diligence. So, yeah, I think it helps, but I think it's that art of the question and not being satisfied with just the first answer, but digging deeper. Because the truth is usually the second or third question you ask will get you closer to the truth. **Harry Stebbings** [26:54]: And being comfortable with silence. It's one of the most important skills I think you learn as an interviewer. I I suggest everyone always interviews. I think you become a better husband or wife, a better friend. But being able to ask a question and sit in silence can be quite awkward, but most often magic leads after the silence. **David Schneider** [27:12]: Yeah. You don't wanna talk just to hear yourself talk. And I tell salespeople all the time, like, hey, you got two ears and one mouth. Spend equal amount of time listening where the two ears is talking. You should be asking questions, not just talking. That will get you closer to a motivation, truth, a reason why to buy than just by talking. So I **Harry Stebbings** [27:33]: am gonna push you a little bit. What's a big mistake that you made with ServiceNow when you think about the mistakes made in that journey? I know it's all up and to the right. I know the numbers show that, but So everyone makes **David Schneider** [27:44]: we made a mistake. We were getting pressured downmarket from what I call low end competitors. But we started getting worried because if some of these people could get traction down there, would they ever be able to go up into our customer base? We were worried about the low end. We built a product called ServiceNow Express. It was written by the same people that wrote the enterprise product. We tried to dumb it down. We did a terrible job of dumbing it down. We brought it to market, there was interest in it. We were selling it for 10,000 to $15,000 versus $50,000 at the entry price. Did a lot of transactions and made a lot of companies unhappy. Product wasn't easy to use. It became a burden for us on support. And quite honestly, we were an enterprise company trying to act like something else. And what I realized is there's 10 competitors downmarket. Let them go beat the crap out of each other down there. They'll drive all the investor dollars into the toilet, and we'll just sit here and focus on what we do really, really well and own the market that matters. And so that's what we did. We exited a market. We made that mistake. How quickly was the mistake apparent? Probably in the six months. We just didn't wanna hear it. How long did it take to make the decision? About a year and a half. I've had worse. Yeah. I mean, we are pretty ruthless about decisioning. And as I said, one of our strengths was make decisions quickly. At the same time, we had to be bold enough to say, Some of the decisions I made of the journey aren't perfect. **Harry Stebbings** [29:08]: One of the biggest mistakes I see founders make that we invest in today is they wanna expand customer segment too soon. They want to expand into enterprise too soon. They want to expand into SMB from enterprise too soon. And I always say it is so much deeper and richer than you think, and we've only penetrated 1% of it. Let's absolutely double down where our strength is. How do you think about when is the right time to expand customer segmentation and when is the right time to say no? We're gonna focus. **David Schneider** [29:33]: What started happening at ServiceNow that we took advantage of was our customers started using our product in places it wasn't originally positioned for. Turns out that by 2015, we had hundreds of customers using us in new ways. And so what we started to do is just listen. And then we productized what they did and built full on customer service product, full on security incident vulnerability products, full on HR employee experience products. And because we just followed the customer, we had better success. That was not easy because we ended up creating business units. I had to come up with a different selling model to sell new technology because the buying persona was outside of the core. I didn't do it until I was fairly penetrated and winning in ITSM. If I didn't feel like I was already winning there and it was not a distraction, then I could do it. **Harry Stebbings** [30:23]: ServiceNow today and ServiceNow while you were there, I mean, it has so many products. It's incredible. My question to you, how do you win with so many products? It is a difficult product marketing challenge. It's a different difficult go to market challenge. How do you think about the lessons from this insane multiproduct challenge? **David Schneider** [30:39]: I think a lot of it has to do with how we managed our teams and what we did from an extreme ownership perspective. There was one metric that mattered to everybody at ServiceNow. In fact, up until recently, they had a bonus profile that was every quarter, we would fund a bonus pool based on the company's achievement of net new ACV, which was new business minus any churn. So everybody was worried about churn revenue and top line revenue, right, new business. So everyone was focused on that. Then as we started to launch these new business units, I remember when Frank and I were talking about it, and this is Frank's genius, he did it before John came in and it was like his parting gift to the business that is still sustainable today. We said, We need people that are gonna wake up in the morning and care about this. Because I had a business that with ITSM and with our IT operations management products, my reps were already blowing out their numbers. So I needed to worry about the strategic issue two to three years from now. If that market ever slowed down, if we got penetrated, what was gonna be the next act? And so we actually launched four products at the same time in 2015. I thought we were gonna kill two of them. For me to be viable, it had to be a 100,000,000 in three years. That was sort of the goal we had for each of these things. 0 to a 100,000,000, which would be equal to be some of the fastest growing startups in the Valley ever. Right? Take a product from 0 to a 100,000,000 in three years. We were doing that inside of ServiceNow. We did all of them at the same time. That was really, really friggin' hard. **Harry Stebbings** [32:02]: What percent of that revenue is from net new customers versus from existing that you have the benefits distribution to? **David Schneider** [32:08]: In the early days, I would say by product was different, and all of my reps cared about all the revenue. So we had a land, expand, retain model. We did not believe in customer success. We can talk about that too if you want. And so every rep, every SE was responsible for the full lifecycle of a customer. From the first time he got them excited about the idea of something to the time where they'd upgraded many, many times and bought other products. That's what I wanted from the people. **Harry Stebbings** [32:34]: I cannot not to ask that. Why not believe in CS? We had Chris Degdon on from Snowflake, and he's like just completely denigrated CS and said that's why we don't have it, and it's bullshit, basically. **David Schneider** [32:45]: Frank and I, when we got to ServiceNow, there was a group called Customer Success. What I found in that group was when I asked them what do they do, they basically did three things that should have fit into other groups. They either were taking calls from customers saying, Something's not working. Help me. Support me. Our support department was woefully under resourced, so they weren't getting the responsiveness. So that job should have been handled by support. Get rid of that and make support do that job. I wanna add more capacity. You're doing well. How do I add more licenses? That job should be done by sales. How do I configure something in my system? I'd like help hands on keyboard. That should be a paid for professional service. So we got rid of customer success because quite honestly, it was a make believe organization that didn't need to exist. A lot of people get excited about it because they're worried about the churn in their business. We were a 98% plus renewal rate, so I didn't have a churn problem. How are they gonna show up and say, What did I do that was uniquely me that was different that I could measure and get outcomes? I could never get customer success people to tell me what they actually did during a day that made us make money. And so the same problem that I said, people buy product to make money, save money, I had another problem. I had to fund more people in support, I had to fund more people in sales, and I had to build my professional services and partner ecosystem. So I got rid of it. And I brought back slowly over time in very boutique ways, but the customers actually paid for those resources, not give it away. **Harry Stebbings** [34:13]: Do you think with the companies you work with today, do you think they should have CS teams? No. **David Schneider** [34:17]: I think that many of them are coming to the same realization. I was talking to one CEO of a fairly largely scaled SaaS company, and he told me, We are gonna be revisiting these decisions. It's fun because, you know, I can't say to people, I told you so, but I start planting the seed. What are they doing? What's your metric? How many do you need? What's your factor? Most customer success organizations come at it with, Hey, I need this many people for this many accounts or for this much revenue. In every organization, I think, How do I become more efficient over time? And so every structure, I've got to drive efficiency. How many dollars per sales headcount am I driving? How many dollars of revenue am I driving for every engineering resource? Revenue and finance. So if I can't get efficiency, I'm not doing my job as a leader in a business. **Harry Stebbings** [35:03]: We have had many people from founders fund on in the past, including your Brian Zingmans of the world, who very clearly has the belief that the best founders do not need help. How do you respond and think about that? **David Schneider** [35:13]: You know, my first response is is probably because he doesn't know how to help. I think everybody in life could always use a friend to talk to, could use an honest conversation. And there is a difference, by the way, between founder friendly and founder helpful. And I think I have to walk the line between what I call founder friendly. I'm in your camp, but I'm gonna also tell you the truth, and I'm gonna get you ready for what's coming. And sometimes that truth is hard to hear, but I gotta be doing that. And you have to know as a person like me that your job is not to do it for somebody. Your job is to coach, guide, consult, be a mentor, almost like being a grandparent versus a parent. What was the hardest thing about making the transition? Learning that I wasn't an expert. Learning how to have a beginner's mindset on something, not get the accolades. I used to travel into London or Japan, and there'd be a whole team of people waiting to meet me and fancy dinners and car service and all this other stuff. This is like, hey, you gotta start again at the beginning, add value, figure out your value to those people, and not come out with a massive ego. **Harry Stebbings** [36:17]: I'm sure we have many mutual friends who are bluntly very powerful. I'm sure you have many powerful people tell you advice on entering venture. What advice did you get? **David Schneider** [36:26]: Most of them said don't do it. Most of them said you're at the apex of your career. You could go do a CEO job if you wanted to. Go be another president or CRO. Every company under the sun wants to recruit you. And to be clear, everybody called. Like you named the top company in the valley, they all called me looking for me to join the companies, and it still happens today. I am making a conscious decision that at this point in my life, this is what I wanna do, and I'm having a lot of fun doing it. **Harry Stebbings** [36:54]: How quickly do you know whether you like investing or not? **David Schneider** [36:57]: Oh, I think it's taken me a couple years because I went through a bit of a cycle. In '21 when I joined, it was let's get deals done. There's a lot of pace to it. That was kind of fun. And what I what I figured out really quickly was How long did it take before you did your first deal? Probably too quickly. I did my first deal in about two months. **Harry Stebbings** [37:15]: You said before that your home is generally kind of series b, maybe series c. You know, we had Sam from Greylock on the show, and he said that actually this vintage of series b and c would not be positive cash returning to LPs. The entry price is too high with revenue multiple compressions being where they are from public markets. It's just too difficult to make money. Do you think he's right? **David Schneider** [37:35]: I think you have to be careful. Every opportunity is worth diligencing on its own, and you've gotta be able to underwrite what you think the value is going to be. The biggest risk factor is something starts slowing down before you expect it to. So you make the investment, you think you've modeled it out, it's gonna go from x to y to z, and we usually even take a haircut on that model from from whatever the company tells us. And for whatever reason, it slows down too fast. And then we don't get to the kind of return multiples we want. Again, enter Dave Schneider. My job is to help you make sure you're hitting and beating your revenue goals. Again, if you're a Series B or a Series C founder, the opportunity is right now, pick the right investor for this stage of your company that's gonna make a difference in your business. **Harry Stebbings** [38:19]: What are the biggest reasons businesses plateau? We see so many between fifty and one hundred, but the growth just comes off a cliff. What are the reasons why those businesses plateau at that stage? **David Schneider** [38:29]: First, do they know their customer? And who are their customers? If you're a business selling to other young technology companies and that's your source of revenue, I'm gonna discount some of your future opportunity just from day one. If you had shown me proof of selling to the large enterprise or a combination of size customers, I'm gonna believe that we can sell to other like size companies in the future. And the smaller companies are more susceptible to the waves of the market, especially with venture funding being hot or cold at any one point in time. If you started winning in pharmaceutical and banking and other big verticals, I think it starts to get more applicable and it stretches out more. Who are your customers, the source and quality of the revenue? Have you been through a renewal cycle yet? Is a big question that a lot of investors miss. I'm looking for, have they gone through a renewal cycle? What happened? Did the ACV grow at that renewal? Did they add more product to it? Or did it shrink or not renew? If it didn't renew, that's a big problem. **Harry Stebbings** [39:31]: So the renewal cycle is a big pushback on the three year contracts because you don't get the feedback as frequently as you would an annual. How do you think about that lack of feedback from the longer cycle? **David Schneider** [39:40]: So you start seeing it in ARR, right? So even in year one, at ServiceNow, when we sold a contract, it could be a million dollar contract, we never really fully sized what the customer could be because they didn't even know. They were expecting it to be a certain number of users, what have you. What happened with ServiceNow, once it got implemented, more people would start showing up to use it, it would grow. So six months after the go live of the system, we should see 20 to 40% increase in ACV size. I'm looking for something like that. Did they have this second product that came out? Was it welcomed in the market? If you didn't have a great first experience, you're not gonna say yes to the second product. There are ways even in a multiyear relationship to start seeing upticks in revenue from those customers. **Harry Stebbings** [40:24]: What happens to the generation of companies that have raised at very high prices largely from 2020, 2021, and they've kind of plateaued and they're not moving into those valuations, what happens then? Is it a role at play? Where do they go? **David Schneider** [40:37]: I think we're in the process of figuring that out. Some of them are reaccelerating the growth right now. So that's one category. Those should be fine. I really believe some of those are gonna come out really, really good and they'll be better for this journey. There's a few others where, yeah, I'm not so sure. I would honestly say they're probably worth more as cash than they are as independent companies, and some of them have made the choice to refund the cash back to the investors, sell off the assets. There's a couple out there that that's happened to recently. And then there's a few others that maybe they'll use the cash to come up with a second or third act, right? They've got enough if that founder has the fortitude and wants to continue on that journey. A lot of the founders are like, Boy, this is hard. I'm not so sure. **Harry Stebbings** [41:21]: I always think a $10,000,000,000 company needs a second or a third act. And I always say the difference between a billion dollar company and a $10,000,000,000 company is a founder who's able to transition between chapters. That is it. **David Schneider** [41:31]: Yeah. I can see the logic of that. I think it's rare that your first product's a billion dollar product on its own. There are some. Billion **Harry Stebbings** [41:37]: dollar company, not billion dollar revenue. **David Schneider** [41:39]: I'm talking billion dollar revenue. Billion dollar company, I think you could do with a single product Exactly. From from an 800,000,000 revenue. Yeah. That's not a problem. I I think about valuation a lot, and I think about the steps that it that you need to do to to get there. **Harry Stebbings** [41:54]: Have you done a deal yet where with the benefit of hindsight, you are like, fuck, I paid too high a price. **David Schneider** [42:02]: Oh, sure. In '21, I definitely feel like sometimes that time in place, we probably paid too high a price. At the same time, because I was worried about that, I missed a couple at earlier stages where I thought they were too expensive. And I came back, I looked at them in the the A, I looked at them in the B, may have even looked at them in the C, thought they were expensive every way, and then bought in at the D, and built relationships with people who are like, okay, these guys have continued to pivot the right way, and it's expensive for a reason. And when you have that combination of founder, market, team going on, then it's probably worth spending money on. But you've gotta get really convinced that that team and that founder has got what it takes to keep going forward and making it. **Harry Stebbings** [42:47]: Is it harder or easier to win deals than you thought? **David Schneider** [42:50]: I think every great company is competitive. There's a lot of dollars chasing deals. **Harry Stebbings** [42:57]: Do you think every great company is competitive? **David Schneider** [42:59]: It's rare. I've had founders specifically tell me they want me on their board, and so then it's a question of can we get close enough to what expectations are to what makes sense? You know, there was a specific situation where it was a light speed earlier stage company. The founder was selecting for board members that could help scale the company and help with no route to market. And he selected Carl Eschenbach and myself. We split it around with Sequoia fifty-fifty. And Carl and I both joined the board. Probably the two, I can say this for sure with Carl, one of the best executives out there who knows more about revenue generation and leading companies than almost anybody in the Valley. So to be alongside of him on this journey and build out this company or at the request of this founder was phenomenal. **Harry Stebbings** [43:48]: How much ownership do you need to be in that position? It's gotta be worth your time. It's gotta be worth my time. **David Schneider** [43:53]: I'm typically in growth deal trying, I'm if gonna take a board seat, it's usually a $75,000,000 check. I'll break the rule and go to 50 sometimes, but mostly it's seventy five minuteimum with the goal of doing more over time before it goes public. **Harry Stebbings** [44:06]: So you're wanting 10% ownership? **David Schneider** [44:08]: Ownership percentages aren't necessarily the most important things. I wanna be in the right vehicles in the right places and have enough money to work to make it matter. **Harry Stebbings** [44:16]: How do you think about upside then? When you think about what is good enough and what you need it to be to be attractive enough. I'm sorry for asking because in really early stage problems, we talk about ownership as kind of the core focus. And so for you, I totally get it in terms of kind of dollars invested as the core focus. But what is that upside requirement then? Is it a five x, 10 x? **David Schneider** [44:34]: Yeah. We're usually in growth trying to underwrite Gannick be five to 10 x outcome. We have a kind of a view of what we call super stamps, the companies that we really wanna be in that are the future IPO companies. And those may not have the same direct return, the risk is much less. And then there's what we think are the future franchise earlier stage bets that we're gonna go in and kind of layer in over time and look for even more upside. So we kind of bifurcated our growth view a little bit, trying to do right by our investors and right by our portfolio. **Harry Stebbings** [45:07]: How do you think about concentration across rounds? When you think about reserves today, how do you think about that? Is it a kind of one and done, we like to put 75 in, or is it continuous across rounds? **David Schneider** [45:17]: It's continuous. It doesn't always mean we participate every round, right? So sometimes things get too expensive, and we'll make a choice that our risk adjusted rate of return for that deal isn't something we wanna pursue at the same level as we would have been earlier around. We will try to participate every time we can. And if the prices are right and the business is executing well, we're gonna definitely layer in. We have a fairly significant sized fund, so we've got a lot of powder. But it's very important that we get the kind of returns we need. **Harry Stebbings** [45:44]: How quickly do you think you know it's a good investment? I take the view that actually you know in three to six months. **David Schneider** [45:49]: I was gonna say, usually three to six months, you undercover all the warts that you didn't see, that they hid from you on the in the diligence process. I've had assumptions not be correct. Assumptions we made on a deal that didn't come to be something changed really fast in the business. And you saw that with a lot of what we call the COVID winners and then the people that now that COVID is sort of in a different chapter, their business isn't acting the same as it was before. **Harry Stebbings** [46:17]: Jason Lampkin, who's a friend of mine, I'm sure you know him from kind of the SaaS ecosystem, he always says, he says, actually, I've stopped giving feedback. I don't give feedback. Maybe the nicest founders will say thank you and then not listen, but everyone else just says bluntly, go away, and feedback is not appreciated. To what extent do you agree with that or disagree? **David Schneider** [46:34]: Feedback when you decide to make an investment or when you decide not to make an investment? Well, let's start **Harry Stebbings** [46:38]: with **David Schneider** [46:39]: when you decide not to make an **Harry Stebbings** [46:40]: investment. **David Schneider** [46:40]: I try to call every founder, thanking them for the time. How many founders do you meet a week? I'd say between four and eight. Now if I'm not the one leading it, my partners who are leading it, I'm sitting in those meetings. So if it's one that I'm leading, I'm gonna definitely make that call. But I also tell people, even if I don't make the investment, call me sometime. And that's a test. I wanna know if they're thinking about me as a resource. Because maybe there's something about it where I just didn't have the conviction yet, but I still want I'm curious enough about the business. And I'm curious about them on are they gonna ask me smart questions? Are they gonna engage? Are they gonna understand the value of David Schneider and Coatue or, you know, one of my partners on their cap table? And if they do, then that's great. And if they don't, so be it. I'm always in the business of matchmaking. Right? So I've got this massive network of people that used to work for me that are always looking for jobs. So if somebody, again, not even in my portfolio, is like, hey, I'm I'm curious. I'm looking for this happened last week. I'm looking for a sales leader in Chicago. I'll hit my Chicago Rolodex and say, hey, there's five guys in Chicago that are worth talking to. I'll make a couple introductions and go on the way. Have you lost a deal yet? Partially. There was a deal that I got really excited about. When it came down to valuation, we did not hit the number that the cut that the company wanted, and I'm sure glad I missed it. So that was one that I probably dodged a bullet because it was the height of 21 in the billions of dollars, and we just looked at it and said, It's just too rich for us. And we walked away after being told he wanted us to lead it, and then we walked away over price. So that was a good learning opportunity, but I don't know if that's a loss. There's another one where we got smaller positions than I wanted, and that's a really hard part for me, Harry, because if my position's too small, it's hard for me to dedicate the time. And so I have to try to tell these founders, you know, this is gonna be awkward. I know you want us. You want me on the board, but I can't use one of my spots I for that such **Harry Stebbings** [48:38]: I because listen, I'm by no means It's the **David Schneider** [48:40]: hardest thing. **Harry Stebbings** [48:41]: I'm by no means the OG that you are, but I have zero time. I'm just like, no. **David Schneider** [48:45]: I've said no a couple times, and one that I said yes to, I do think it's gonna be a generational company, and I really love the founder. I've known him for ten years. So it was one of those where existing investors preempted around. We got a smaller piece than I wanted. There was a commitment to try to drive more. It didn't happen. And so now we've had the honest conversation about, hey, it's gonna be harder for me to spend the kind of time you need. And unfortunately for him, he's in the process of needing that help, but I gotta figure out what the right thing is. I wanna be friendly, but I also have a business to run, and I gotta watch my time. **Harry Stebbings** [49:18]: Do you share Vinylockosa's view that 90% of VCs detract value? **David Schneider** [49:22]: My terminology from experience is there are VCs that are seagulls, fly into a meeting, fly into a location. They basically take a shit and they fly away. They talk a lot. They give work to do for other people to do on the management team that distracts the management team from doing anything that's important. And you've got to control for the seagull. This goes into the quality of the board that you're bringing on and the kind of people. And also goes into, as a management team, you need to set the tone and set the agenda for what's important to you. So for example, when I led the review of any portion of ServiceNow or Data Domain, I started with the three things that were working that were really green and the three things that were red. If somebody wanted to help me on something in the red, be my guest. But if you wanted to bring another thing on my list, it wasn't welcome because I already know my business. And so having the confidence as an operator to say to the board, this is what's going on in my business, here's what I'm working on, that keeps the seagulls away. **Harry Stebbings** [50:23]: There will be so many founders on their way to the office listening now going, that's my fucking board. That's my board. What would you advise them? Come with the three reds and the three greens? Control. **David Schneider** [50:33]: And I think it is really important to control what you wanna have a conversation about. Set the agenda. Spend time before the meeting talking to people what you wanna have a conversation. Don't surprise people. Give them time to do the preread. If any board member's coming in without doing the preread, that's shame on them. You actually don't need them. They've gotta do the work too. **Harry Stebbings** [50:51]: I always say call each board member up beforehand. Can be five, ten minutes, but just like, Hey, David, what would you like to achieve out of this board meeting? And you say, Hey, I'm worried about our sales efficiency. Efficiency. Great. Great. Why Why don't don't I I address that with you now? Have you resolved that? Yes. Great. Then we don't need to take it to the board. **David Schneider** [51:05]: Yeah. Sometimes it needs to be at the board meeting, sometimes it doesn't. I do think it's up to the management team to drive the clarity of thinking and avoid when you're interviewing potential board members. Look for relevant experience. Not the fact that they've been on eight other SaaS boards, but have they ever done anything themselves? And I would just call that out. There are now enough people on the venture and growth investing world where people have had hands on experience that you should drive from, and some people don't have it. And so it's that kind of a nice mix that you wanna look for. **Harry Stebbings** [51:40]: I'm gonna do something really unfair. Three board members that you most like to work with. Oh, goodness. **David Schneider** [51:46]: Well, so Doug Leone was on my board at ServiceNow. He's on two boards I sit on now. He's phenomenal. Love working with him. What makes him so good? He's got wisdom. He's practical. He also knows just about everybody and can get people together on topics very quickly. And he doesn't tell people what to do, he gives them ways of thinking about it, which is what I try to do as well. He's also patient but demanding, which is kinda a little bit like me too. Like, you can be demanding, but you have to be patient and understand the cycles. And he's incredibly responsive. If I make a phone call when I was at ServiceNow to Doug, and it was very rare, usually he was calling me for advice. So he was responsive to me wherever he was in the world within seemingly, like, fifteen minutes. I would say Mike Volpe, who's now, I think, in the process of retiring from active doing new boards, he brings an operator mentality with him. The other guy that was on one of my boards, Aneel Bushry, who no longer does this as a living because he started Workday, but he was on my Data Domain board and he was awesome. Because of all the people, he convinced the engineering and product team before they started putting hands on Qboard to go spend a 100 conversations with customers to know their problems. And I think so many founders get it wrong. They rush to start building a product without knowing the customer and knowing what you're building for. That kind of advice is so practical still to this day, and I think that's a lesson I learned from Aneel. **Harry Stebbings** [53:09]: What advice would you give to me on what I can do to be the best board member? **David Schneider** [53:13]: Everyone has a superpower, and I think everyone's job is to find their spike and try to leverage it on behalf of the companies and people that they're dealing with on a regular basis. For you, it's probably a bit of the networking that you have and your perspective on the world. Your PR capability from what you do here at twenty VC is pretty amazing. And I think, again, pattern matching for people because you're seeing so many different situations. **Harry Stebbings** [53:38]: Do you find pattern matching hard as an investor though now? Because you have your Slootman, your Bill McDermott, you've got the best of the best CEOs in the world. At a point in the career, though, where they've seen it all, done it all in their OGs, and then you're kind of translating that to a 30 year old founder building a B2B product. And they might just be as good. They're just earlier on the curve, but you're doing a like for like given the experiences that you have. Is that hard? **David Schneider** [54:02]: I don't compare the Frank Slootman that exists today after three IPOs to the founders that I'm working with at a series b or a, that's that's not a fair compare. I can compare because I worked with Frank at Data Domain when it his first CEO job Mhmm. And how he was and what he was doing to drive urgency. **Harry Stebbings** [54:20]: I've got to ask about two people, then we'll do a quick fire. But one is the Lafontes. You work with them now. What are the biggest takeaways from working with them? **David Schneider** [54:28]: The reason I picked Coatue out of all the firms I was looking at was they themselves are innovative. They themselves are entrepreneurial. They themselves are trying to build the best company in the world in the categories that they serve. They're not afraid to try something. And Thomas had great vision. He said, The color of money isn't gonna change. It's gonna be green in the case of the US dollar. But the way in which we can service our investments will have to change if we wanna be world class. And so he went out and recruited guys like me and Dan and Karen and others to join the firm to make us different than everybody else who is just doing traditional growth investing. **Harry Stebbings** [55:04]: I wanna do a quick fire because I could talk to you all day. So I say a short statement. You give me your immediate thoughts. Does that sound okay? Sounds great. Okay. So what do you believe that most around you disbelieve? **David Schneider** [55:13]: People are the difference makers. If you can get a group of people together who have a lot to prove, who really have the hunger to do something, that can really make the difference in a problem. And you gotta let them run at the problem. **Harry Stebbings** [55:27]: Biggest lesson from flying 100,000 miles a year? **David Schneider** [55:31]: No. The biggest biggest lesson is you're there for a reason. It's to go talk to customers and impart your wisdom on the culture of the company. Every time you're in a city, don't waste any moments. If you're not having a dinner with a customer, have dinner with employees or partners. Understand that the time, the windshield time in a car with employees is valuable. Don't be distracted by your phone or your social media. Talk to them about their lives, talk about their hopes and dreams. And what you find is people are fairly aligned. We all have similar hopes and dreams. We may wanna get there a little differently, but it's financial security for our families, doing interesting work, maybe get promoted, taking a couple vacations a year. Those are the things that tend to be the most common, and you can really sink into that with everybody. **Harry Stebbings** [56:16]: I always find it quite funny. Someone said to me the other day that we spend our whole childhoods trying to fit in, and we spend all of our adulthood trying to stand out. **David Schneider** [56:23]: I went from wanting to be liked to wanting to be respected. And that was a very important lesson as I went from an individual contributor to a manager to a leader. You know, respect is something that's earned, that's the most important thing. Do you **Harry Stebbings** [56:37]: agree with the shit sandwich feedback now? You know, the shit sandwich is like, oh, Dave, you did really well here, but this wasn't great. But overall, you're doing great. Maybe I'm just getting old and jaded and cynical. I don't have time for a shit sandwich. David, this could have been improved. Why wasn't it done like this? **David Schneider** [56:53]: I'm a believer that feedback is a gift, and it needs to be given frequently and as quickly to the situation as possible. And there are moments where I need it too, and I've gotten it, and I've made massive corrections on my behavior. **Harry Stebbings** [57:07]: What was the biggest correction you made on your behavior? It's a little embarrassing. Go for it. **David Schneider** [57:11]: Okay. So my shit sandwich moment. Early days at Data Domain, I was really nervous about getting the product deployed and getting a couple good experiences going. And we had a proof of value running at a very, very large national lab in the Bay Area. And the product was not working the way it was supposed to work. In fact, it was a disaster. And I'd come from big companies where responsiveness between sales and engineering was slow. In my old company, big company mentality, I sent an email and I sent it with about enough flames on it that would catch a mountainside on fire. And I sent it and copied Frank Slootman, thinking that Frank's gonna have my back and he's gonna force them to go pay attention to me. And I was like, okay. Frank comes marching down to my office, closes the door, and I thought he was gonna say, what can I do to help you? Instead, he said, if I ever see another fucking email like that, that'll be the last email you send here. And he goes, these people have been building this product for three years before we showed up. Give them the chance to be successful. Get up out of your chair, go talk to them, ask them to go visit the customer with you, solve the problem. I immediately went over to all those people, apologized, brought them donuts and other things the next day trying to rebuild trust because I just broke trust. And I should approach it from a human perspective. I need help. Can you help me? Within three days, we got that thing working, flying colors, sold the biggest deal we ever did in the company's history. We learned a lot together because the feedback was so instantaneous. It allowed me to fix something that I could have created a mortal sin around. And I tell people all the time, go first person in conversation. Don't send email. Talk to people. Pick up the phone. Go meet them. If it means flying across the world to go have that conversation, better do it that way than having an email. When Slootman's pissed, is everyone scared? It's not a pretty thing. When I'm pissed, everybody's scared. Mean, mean When **Harry Stebbings** [59:07]: are you friends? You seem so lovely. **David Schneider** [59:09]: Yeah. I'm a teddy bear till I'm not, and then I'm like a grizzly bear. And that confuses people because I really do care deeply, but there are things that are unacceptable to me. And now in hindsight, I totally understood where Frank was coming from. And I respected him so much for coming to me right away. He fixed my behavior. He may not even remember that conversation, but it's one of the most cementing moments of my life around how to build great culture in a company and how to destroy culture in a company. That was a massive learning opportunity for me. I'll never forget it. **Harry Stebbings** [59:41]: Bill McDermott, one of the most hailed CEOs of our time. Biggest takeaway from working with him? **David Schneider** [59:46]: So I worked with Bill at the end of my ServiceNow career. He joined in a kind of weird situation. We had John Donahoe, who's a great human being, great CEO as well. He's now the CEO of Nike. John was on the board at Nike, got the offer of the lifetime to go be the CEO of Nike. It was something he'd always been interested in doing. And so he took it. Bill gets parachuted in on our third CEO transition in the ten years that I was there. And what really is apparent to me is Bill understands enterprise SaaS. He understands sales as well as anybody. I'm really good at selling. Bill may be even better, which is hard for What me makes to him **Harry Stebbings** [60:21]: so good at selling? **David Schneider** [60:22]: Creating stories about understanding customers, listening, meeting them where they are, trying to solve the business problem. Then Bill is just really smooth. Like, I can sometimes fumble over a word here and there. I've never seen Bill fumble over any word. He just has a certain way about him. And then his relationships with executives is second to none. He spent, I think, ten years at SAP. He knows every large CEO, large company CEO, CIO, world leader on speed dial. He's just super connected. So as a CEO in a company the size of ServiceNow, at times we need help getting to a board level discussion because the funding decisions are so big. We're talking $10.25, $50,000,000 a year sometimes for these transformational efforts. That's a big lift for any company. **Harry Stebbings** [61:11]: Final one. What question are you not asked often or ever that you should be asked more? That's a great question. **David Schneider** [61:18]: Part of my superpower and it's part of what drives me, I fear failure even though I don't know what it looks like. Meaning, I'm afraid of not doing my best work and somehow dropping the ball or disappointing someone or something in the process. And so for me it's this drive to constantly think about all the different possibilities so I can do the best job of stewarding a team myself through a situation and get to the outcome. So, you know, when I go to sleep at night I'm thinking, yeah, the day was pretty good, but I'm also thinking about, okay, what do I need to do to improve for tomorrow and how do I make it a better day? And I think that's part of who I am. Now I've tried to harness that in some kind of mindfulness exercise, be a little more sane in my approach, but I was always kind of unsettled, thinking I needed to do more was part of my issue. **Harry Stebbings** [62:13]: I found the most reassuring thing, the recognition that 90% of your worries have never actually happened. **David Schneider** [62:19]: Yeah. Anytime you get close to one of those worries happening, it's a scary thing. We all have our foibles, as I said, we're all survivors of something. We have to grow from every experience. I think as I've gotten older, one of the things I've realized is the past is the past. What did I learn from it? How am I gonna adopt it going forward? And now when I work with executives, we're debriefing about it quarterly, the thing I'm really looking forward to, what do we learn from the last ninety days? How is that gonna change our approach for the next ninety days or the next year? And how are we gonna build from here? I don't wanna spend too much time worrying about the past. I wanna build from whatever just happened and go forward. And I think that's a very powerful way of positioning that insecurity into a strength, and I'm trying to deal with that. **Harry Stebbings** [63:03]: Thank you so much for being such a great guest, and I've so enjoyed having you on. **David Schneider** [63:07]: I love listening to your podcast. Again, I learned along with everybody else who's listening to your podcast. So thanks for doing what you're doing, and I appreciate it. **Unknown** [63:16]: I absolutely loved having David on the show there. What an incredible operator and just thirty years of operating experience to learn from. I wanna say huge thank you, Tim, for joining me today. If you'd like to watch the full episode, then you can find it on YouTube by searching for 20 v c. That's 20 v c. But before we leave you today, ## Sponsor read **Unknown** [63:33]: all of you listening use tons of software every day. Sometimes it fills us with rage. You can't figure something out. The chatbot in the bottom right is useless. You keep getting bombarded with these useless pop ups. And for those of you who build products, no one wants their product to feel like this. Thankfully, a company exists to help users without annoying them. CMDBAR. It does a couple of very helpful things. First, it's a chatbot that uses AI to give users extremely personalized responses and deflect tickets. But it can be beyond just text. It can also co browse with the user and show them how to do things inside the UI. Magic. 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