Best of Both Worlds: Q&A with SendGrid’s Founder and CEO Daniel Randa November 29, 2012 Company, Events // SUMMARIES ?> In early 2011, SendGrid’s founder Isaac Saldana stepped aside as CEO to make way for Jim Franklin to assume the role. Since then, the two leaders have found success by working together to combine technical and business expertise. They have managed to reduce conflict, promote common values, and worked to bring out the best in their employees. On October 31st, they sat down to answer questions about teamwork, entrepreneurship, and leadership. To hear the complete conversation, access the webcast recording here. What made you realize you needed to bring on a CEO? Did you come to that realization on your own or did you have input from other trusted mentors? Isaac Saldana: Initially I was the developer and the CEO and when the company got over ten people it was obvious that I needed to focus on one single thing. In my case, I really wanted to focus on coding, and I relied on my mentors to help me with this decision. Luckily, a lot of the mentors that I had were also a part of SendGrid’s board, so they helped with the decision. It’s one of the best decisions as CEO that I ever made to bring another CEO. How much of a role did your impression of Isaac make in deciding to accept the CEO role? Jim Franklin: Clearly it’s hugely important when coming in as an outside CEO. Founder relations is a key part of it, so is having good cultural fit. I’ve had some experiences where there wasn’t a good cultural fit and that leads to a lot of unproductive conflict and I didn’t want to get into that situation again so I was very interested in Isaac being the primary founder, and everything that he was all about. I think a general rule in life is that everybody loves Isaac and I certainly fell under his spell and I realized that I wanted to be a part of what he had created. I flew out to California to meet his co-founders, Tim and José, and they were equally awesome so that was great. But then also meeting the board members and seeing what they were like, because I hadn’t met them before, and really between the board, the investors, and the founders making sure there was cultural consistency. And really everyone in that group is what we call founder deferential: we want to defer to the founders on all the big questions, and if the founders don’t buy in to a certain strategic direction then were not going to go there. And that’s something I think that’s made our relationship, whether it’s between me and Isaac or the board and investors, be successful. Was it difficult to turn over the reigns of the company? IS: Actually, it wasn’t difficult at all. And I use an analogy: when you have a kid growing up, by the time they turn five and they have to go to school you have two options. You have the option to teach them yourself and home school them, or you send them to school if you don’t feel confident you’re going to e able to teach them the best. In my case it was similar where I knew bringing in a new CEO was one of the best decisions I’d made. Initially I was worried like you worry the first time you send your kid to school but at the end of the day you know that’s one of the best decisions. How did you get up to speed on talking about email infrastructure and the industry in general after coming from a different background? JF: Well that was one of the trickier parts that I didn’t come from not only an email background but also cloud computing in general or the SaaS business model. So you may wonder what in the heck was I thinking; that could be a different topic. The first thing to do was to really focus on employees, and they were very helpful in educating me and helping me to get up to speed. Also, obviously reading all of our material that we publish, and now we certainly publish a lot more material. And actually using our products. I’m not technical so I cant code APIs but with our newsletter product that is something I can go through and use to get a sense of what its like. Also, traveling; I like getting out a lot to customers and partners and that was very powerful to hear customer stories, saying how “SendGrid saved my business” because the email wouldn’t flow for a key partner, or a big launch date. It turns out that email infrastructure has a way of failing at the most important time and that’s when people really like SendGrid to come in. They outsource it to us, and we can be the heroes and solve the problem. So those are a variety of way to get up to speed on SaaS and email infrastructure. When you came up with the idea for SendGrid, were you thinking mostly of solving a technical problem you had encountered, or were you driven by market potential? IS: Unfortunately, I didn’t have an idea of how big the market was for this. I started solving my own problems, and I really encourage everyone to solve their own problems initially because if you’re thinking about doing a startup, the worst case scenario is if that startup doesn’t work, you still can use that product or service that will solve your own problem. In my case it was one of those things where I started solving the problems that I had and it eventually ended up turning into the company that SendGrid is at this time. How difficult was it to build a team to support the business side of a company that was so technically focused? JF: I think that if there’s one thing I do well, it’s teambuilding. And in this company I had the luxury of having a great start to the team, not only on the technical side with the founders but also on the business side. Denise Hulce who runs sales was already here, Chad Varra who had been at Rally and had taken a SaaS company from 10 employees to 200 was incredibly helpful in learning SaaS models in general as well as having a good grounding at SendGrid, and then Robert Phillips head of marketing was doing very well. So those three key players were already in place. To add to that I recognized Joe Scharf, who was an employee and promoted him to the management team- he runs our worldwide support organization, which is a really key thing for our customers. And as Isaac and I worked together we realized that Isaac’s passion really wasn’t in running engineering either. He wanted to do the coding and do the innovation, but running an agile process, premise code meetings, and backlog rooming, and budgeting and planning was really a managerial role. So we added Thomas Peng to run engineering and John Prall to run production ops, because that’s it own set of talent. So it’s really been fortunate to have a good start to build a track of great managers for this company. What was the process you took to find the right CEO? Did you interview for the role? IS: I actually met all the candidates and it was a long process. It’s difficult to bring a CEO to your company. It was about a six-month process, and I met all the candidates. We already had an existing set of values and we wanted someone to match those values and Jim summarized them pretty well to the four H’s: humble, honest, happy and hungry. Once I found a few candidates, the board was really helpful to help me pick the right candidate. We fell in love with Jim quickly. I’ve heard you say before that being a CEO is a lonely job, why is that? JF: The short answer is that you’re a team of one. If you have any other role in the company then you are a part of a broader team, the marketing team, the sales team, the engineering team, or one of the agile teams. I like to think of it if you can imagine it being like a sharks tooth, a pointy triangle. And there are two teeth, two triangles coming to meet at the point. The point above the CEO starts with the board- the broader shareholder community, and they sort of come down on top of your head. And then below you, that other point that’s coming up at you would be the management team, so the managers, the employees and the customers. They all kind of funnel up that direction. And you’re really sort of in that lonely spot in the middle. That’s why it’s very important for CEOs to spend time with other CEOs because there are things that you can talk to other CEOs about that it’s hard to relate to if you’re a part of the manager team or on the board or some other part of the organization. Now that you’re free from running the company, what do you focus on within SendGrid? IS: I moved to California so I currently live in Orange County. I focus on strategy so I’m still a part of the board. I get to work on things that I’m really, really passionate about. This is really exciting, and I get to get my hands dirty and try different things and see what is going to work for our customers and that is where my passion lies and I get to work on that on a daily basis. We know that you have brought the idea of the 4H’s to SendGrid, why are these so important to you? JF: So quickly what they are: honest, hungry, humble, and happy. Why they are important is that cultural consistency is really the key to organizational effectiveness. That sounds like a lot of fancy words but really I think that it comes from my being fired many times and in the summer of 2003 I was thinking, “wow I’m a responsible adult now, I’m married with kids and I should probably stop getting fired from professional jobs” and so I thought about where ever I had conflict in an organization was where two values collide, and if you look at conflict in your life then you can deduce what your values are versus what the values you were bumping into and that’s how I was able to come up with this framework. I don’t think I brought the 4H’s to SendGrid, they were already here and Isaac said it well that I just summarized, or put a label on what was already happening. It was their framework for hiring and making other decisions. When you have value consistency regardless of what your values are, they could be the four A’s or something else. When you have that consistency you really minimize the most wasteful conflict and you just have productive conflict. It could be about whether we have an agile shop or not, or to do this product or that product but were not arguing about whether or not we should share information with people. We play it wide open, that’s part of our honest value.