SaaStock17 kicked off with a bang as Ryan Smith, CEO, and Co-founder of Qualtrics and Philippe Botteri, Partner at Accel took the stage for a fireside. The conversation circled around Ryan’s experience growing Qualtrics over the last 15 years. From starting in his family’s basement and bootstrapping for 10 years, to raising $480M, Ryan has been through rough spots and pivots and successes that any entrepreneur would dream about.
A few facts about Ryan:
- He hails from Provo, Utah
- He’s the father of 5 kids, with his wife Ashley
- He loves Dublin
- He plays golf to recharge
- He drinks a lot of Diet Mountain Dew
Qualtrics is something of a family business. Ryan started Qualtrics with his father and later snatched his brother away from a prominent gig at Google to help him build the business.
Below are the 5 tips to building a SaaS unicorn, dispelled in a Q&A, lightly paraphrased and edited for brevity.
1. The right partners
Do you think one needs a Co-founder?
I’ve always worked in a pair. You need to offset each other. It’s the most lonely job in the world; I can’t imagine doing it without a partner. You want a thought partner who thinks very differently from you. But if you get it right and you can go deep with this person, you’re able to go places that you’re not able to go with most of your execs. With my brother, we can get to the 10th or 15th iteration of an idea, the place where you begin to break into some form of innovation. With execs, after the 2nd or 3rd iteration, the pain gets too high. They want to jump out the window.
Almost everything we launch is wrong anyway. So you need to have a partner you can really go hard and work through that with.
As the founder you have to be the fastest learner in the building.
Some people don’t want to do that for 15 years, to learn that fast for that long. It’s not that they aren’t capable, it’s just that they’ve had enough.
2. The right team
You need to hire execs for parts of the business that you don’t know very well yourself. How do you find the right people?
I want people who are willing to go through hard times, who are willing to learn, whose best years are ahead of them (which has nothing to do with age). I want them to be willing to tear down what got them there. You have to tear down successful stuff in order to scale sometimes. Even if it’s working.
I think a lot about whether I would jive and get along with this person. There is an element of luck involved. And I have to convince them to move to Provo, Utah. So…you know, it’s not that hard.
What is your advice on building an executive team?
Always be recruiting. You’re never done. I’m always recruiting. I spend 30–40% of my time on it. So my advice is to look at your time allocation and how much time to put toward recruiting for execs. Your search should never be turned off. Keep looking and pay attention to who you meet and who’s around.
3. Persistence to break and fix (and break and fix some more)
You’ve mentioned the importance of persistence before. How do you judge persistence in an interview?
I try to identify if they’re a victim or not. Are they the type of person where it’s everyone else’s fault, or do they take responsibility? I want to understand how they think through the tough times. We are all getting paid in the anticipation of something going wrong. When things are going good, I don’t really need you, things just work. What I often see is that when something goes wrong, everyone runs off the field. You need the type of personality that LIKES when it’s time to fix something.
We’re constantly breaking our model and fixing it and breaking it again. If someone is standing around saying “hey everything’s broken,” they are not the right fit. In SaaS, if you’re not breaking your product, all the while you are in a hyper-growth mode, then you are running something too smoothly and slowly dying. If you’re not growing fast and breaking, then you’re dying a slow death.
When things are going hard, that’s what you are paid to fix.
4. Focus on the next 90 days, not the next 5 years
The next 90 days will make or break your business, so don’t plan 5 years down the road.
As a founder, you can write your own story. Every quarter you have to tell a different story. With each meeting or talk, you tell a story about your business — and the next time you meet with that person or that organization, you’ve already told the old story once. In each quarter, you need to know: What’s changed? What’s the story now?
It’s tough to plan more than 90 days, but at the same time, you have to be thoughtful about long-term growth. Those are totally opposite traits: short-term planning, long-term thinking. And as a founder, you often need to balance these polar opposites. You have to care, but not care too much. You have to master the emotions on both sides.
5. Know when to fundraise and find the right investor
Money is the lifeblood of the business, whether it comes from customers or VCs. How did you bootstrap Qualtrics for the first 10 years? How did you get customers without a dime of investment?
It wasn’t easy, but we had no other option. We launched a product originally for academia. It was a terrible product, but academics could just sit there and tinker with the product all day. They had nowhere to go! There were so many problems, but we had users. We also had a terrible business model, but we had users. And those users began using Qualtrics in unexpected ways, so we realized we could pivot out of academia.
We became cashflow positive and thought that was it. We never thought VC money was necessary. But with the pivot to an expanded user base, I saw a huge billion dollar opportunity. In 2012, I convinced my father and brother that we could raise money. We had great offers, including an offer to buy the company, outright. We chose to go with the most able operators out there, we chose to go with you guys at Accel.
What’s cool is that you ponied up to invest in each round after that. My advice to entrepreneurs is to find an investor who can write the second and the third check, too. Not just the first.
Additional questions from the audience.
What inspires you?
I work hard to make sure my identity as a human being is not Qualtrics. I’m passionate about it; I have to be in order to get up every morning and work this hard for 15 years. But if I think about what inspires me, I think, “I’m Jett’s dad and I’m Ashley’s husband.” I think that’s really important. That’s what has to inspire me. As founders, we get caught up in the company we are building, but we all have to be thoughtful about the bigger picture.
What’s the biggest hurdle you have faced?
The period of 2006 to 2008 was a big hurdle. We hadn’t raised money and had just moved out of the basement. We had about $150k MRR and hired quite a few people. And then the economic downturn hit.
I don’t think a lot of tech companies have been through a crisis where they asked themselves — how important is our product? Where are we in our customer’s pecking order? When 50% of their budget is cut, where do we stand? In a recession, we had to pivot to a recession-proof offering. I remember thinking, “Okay, what’s the sales pitch now? It has to change.”
Hurdles force you to be honest. It’s when I realized it’s okay to pivot. It’s okay to throw some things out and rebuild something new. There’s no amount of money I would take to erase those experiences. Because I think that struggle is where the innovation of our culture comes from.
If you want to learn more about Ryan and the Qualtrics journey, read our story, “From $0 to $2.5 billion with Qualtrics CEO, Ryan Smith”