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The Second Five Years

Three startups, three very different paths to success. Ajay Agarwal, managing director at Bain Capital Ventures, interviews Raj De Datta, CEO and cofounder of BloomReach; Josh McFarland, former CEO and founder of TellApart and now senior director of product at Twitter; and Sameer Dholakia CEO of SendGrid. The four talk about what happens after a startup’s non-stop action, move-fast-and-break-things infancy and how they’ve managed their companies’ second acts.
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Special thanks to Jason Lemkin of SaaStr for putting on this conference and giving us the chance to publish these summaries.

Q: How has culture had to change as you grew?

De Datta: BloomReach had implemented a no-titles policy, but of course that had to change as the company scaled. The values have stayed true, but the mechanics of those values has changed. One mechanism we used to use were peer awards, but that doesn’t work with thousands of employees.

“One of the hardest things about culture is that there’s a temptation to synonymize culture with fun. Most of culture is about how work gets done.“

Dholakia: Values will never be dislodged, but again, the mechanisms of how you show those values do change over time. As an example, the entire company flies down to Mexico for an alignment session in January. This helps employees go from colleagues to teammates.

McFarland: TellApart was known for its culture and team, but unlike the other panelists, the company had never actually sat down and wrote out what that culture was. They focused on the impact on employees’ resumes, bank account, and memories - that is, building an exciting, learning-focused, and stable company. When Twitter acquired TellApart, he set the goal that a year after the acquisition, the two would be so integrated in team, value and culture that they’d be indistinguishable. If people clash, trust in intent - it’s a problem with mechanisms, not personalities.

Is your company as aggressive as it was in the first five years?

De Datta: In the early years, BloomReach was aggressive about surviving - how to make it to the next stage or product. Now, they’re still aggressive, but the aggression is towards building something sustainable and long-term. In fact, he’s fighting to keep things aggressive and avoid politicking and getting sidetracked.

Dholakia: The upcoming funding crunch will change aggression - you’ll have to back away from aggression and growth at all costs in favor of profitability.

McFarland: Twitter is struggling - its valuation is down, there were a number of management changes, and there’s been a lot of change. But inside the company, the attitude is, “I can’t believe that there are people in the world who don’t use Twitter. How do we make it known that we have such a valuable product?”

They’re really shaking things up - as returning CEO Jack Dorsey said, “There are no sacred cows.” It’s imperative to stay aggressive no matter what your stage - Twitter got complacent, and is now going back to its earlier aggression.

Q: How do you think about your executive team as you scale?

Dholakia: The company brought in a number of C-level and executive hires. Often, the original executives realized that they were passionate about growing, not scaling, and would opt out of the next few years of the company.

De Datta: It seems like BloomReach went through three phases. In the first phase, it was us-against-the-world mentality where titles and roles meant very little. At some point, around three years in, they realized that they needed a true executive team. He spent months recruiting to fill those roles. Now, it’s about recommitting: who has the energy and aptitude to keep going? This has to be done consciously - if there’s constant churn on the management team, your company won’t hit a rhythm.

McFarland: This needs to be vocalized. Have a frank conversation about whether your direct reports and peers (and yourself) have the ability and willingness to see the company into its next phase. You need to know that everyone on your team is committed through thick and thin.

Q: By definition, if a company is in its next five years, it hasn’t folded or been acquired. How do you think about exits?

McFarland: We looked about risk, workload, and potential reward. Their deciding factor was that as a part of Twitter, they could do so much more.

Dholakia: It’s all about the mission, and there are lots of ways of achieving that mission. There’s an allure to doing things “your way,” but on the other hand, your goal is to maximize shareholder value. In the end, it’s about building something that lasts - whether or not it’s an independent company.

De Datta: There’s a rational calculation and an irrational calculation. On the rational side, you’re thinking about assets, funding and so on. Even if you’ve been a successful company for five years, the rational option is almost always to sell - the future is just too uncertain. Irrationally, though, you think about the journey: as a founder, will you have achieved your goals?

Q for De Datta: you just raised a large round of funding ($56 million). Any advice for founders?

De Datta: If you’re trying to raise money in this market, don’t take things personally. It’s not about you (and sometimes not even about your company) - take your ego out of it, and look rationally at the outcome.

Q for Dholakia: How are you evolving your businesses?

Dholakia: One major question was integrating the marketing persona with a developer persona. He thinks of his business as a company - not just a product - which means that bringing in new personas is a natural outgrowth. It’s not easy to extend to new personas, but it’s a part of being a platform.

Q for Dholakia: How did you go from a platform for developers, to one for developers, marketers and other groups?

Dholakia: They’re still all-in on developers and frame their community engagement events around that. You have to be explicit about the tradeoffs between building for developers and for marketers, and the business case for both.

Q for McFarland: How have you managed the acquisition with Twitter?

McFarland: One of the key principles of TellApart was a true integration. At the start, they were asking, “How can TellApart disproportionately grow Twitter’s value?” It turned out that TellApart’s ability to differentiate between logged-in and logged-out viewers, and its presence outside the Twitter advertising network, would have a major impact on Twitter’s ability to monetize.

Q for De Datta: How has your product shifted?

De Datta: It’s the movement from one product, to multiple products, to a platform. They came from the perspective that they didn’t have a big enough solution to be a platform, but found that their customers were hungry for it. They’re transitioning from products that add value individually, to a platform that’s more than the sum of its parts.

Q: Do you miss the early days?

De Datta: It’s like having kids - you always look back with nostalgia. Yes, there are many great moments early in a startup’s life, but there are many similar moments, and what’s most important is to look ahead.

Dholakia: There are great stories from the early days, sure, but the prevailing sentiment is that the best is yet to come.

McFarland: He doesn’t miss the early days at all. He’s still very engaged - replying quickly to emails, working hard with a small team, and seeing his efforts have a clear impact.

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