{
  "video_id": "yco9JP0PyLM",
  "channel_slug": "sequoiacapital",
  "channel_handle": "sequoiacapital",
  "title": "Palo Alto Networks CEO Nikesh Arora on the Virtues of Being an Outsider",
  "duration_seconds": 3879.0,
  "url": "https://www.youtube.com/watch?v=yco9JP0PyLM",
  "upload_date": "",
  "transcript": "So many founders get trapped in this\nidea that I should get customers as fast\nas I can. I should ask them what they\nwant. I think it's worthwhile. The best\nfounders should actually spend some time\nbuild the product based on their own\nvision, show an end toend point of view\nand solve a real problem. For everyone\nwho's listening or every CEO or founder\nis in the early part, swing big. Swing\nbig, you fail big.\nIf you're a new new CEO,\nwhy not swing as hard as you can, right?\nTake three swings. Who cares? At the end\nof the day, if it works out, it's going\nto work out spectacularly. If it doesn't\nwork out, pack your bags and move.\nIf you want to hear a master class on\nhow to be a CEO, listen to this pod with\nNikesh Aurora, the CEO of PaloAlto\nNetworks. We go behind the scenes on\nNikesh the man, his remarkable career,\nthe lessons he learned from Larry Page,\nEric Schmidt, and Masasan, how he became\na CEO, how he actually does the job, and\nhow he earns hundreds of millions a year\ndoing it. We go deep into one of my\nfavorite topics, second acts, and how\ngreat companies become platforms, which\nis often the difference between a really\nnice outcome and a legendary one. and\nthey're pulling the legendary side off.\nAnd we go very deep on M A.\nUm, and we go deep on M A from his side,\nthe buyer's side with some really smart\nacquisition practices. I really like\nthat. But this podcast is much more for\nthe entrepreneur. So, when I come back\nat the end, by the way, I'm going to\nback at the end with a bunch of takes on\nthis. But one interesting take I'm going\nto have is I'm going to flip it around\nand I'm going to talk about best\npractices on getting acquired from the\nentrepreneurs perspective based on what\nwe learned on Nash does it. So we'll see\nyou in a bit. Hope you enjoy the\npodcast. Um going to be great. Okay\nNashesh about 27 companies.\nUm things I get questions on from\nstartups and we ask ourselves at HubSpot\nlike we buy a company and sometimes we\nkind of throw a lot of it away. keep the\ndomain expertise and the talent and\nrebuild it on our platform because we're\na platform company and kind of our\ndifferentiation relative to Salesforce\nand other companies is we are kind of\nallin one.\nDo you ever kind of throw out a lot of\nit and rebuild it or do you kind of keep\nit all and just keep pushing it in the\nmarket?\nLook, if you think about acquisitions,\nthey take on different forms. Now, cyber\nsecurity is so fragmented that they're\nactually four or five swim lanes. So you\ncould actually build a platform in every\nswim lane. For example, you can build an\nendpoint platform. You can build a sock\nplatform. You can build a network\nplatform. And these don't talk to each\nother as much. You can move data from\none to the other. But yeah, you\nshouldn't build an endpoint stack with\nfive different technologies. You\nshouldn't build a network. So there it\nmatters if you're rewriting on your\nstack or not. Now you know if you think\nabout what inspires you to go buy\nsomething versus build it yourself you\nknow it becomes an essential feature you\nbelieve you can take the innovative lead\nin doing that and the process of\nintegration is 3 months or four months\nand that you're willing to take that hit\ntake for example we were never a player\nin sassy which is you know a form of\naccessing your your infrastructure\nremotely we saw that AI is coming There\nare certain use cases which are not\nsatisfied. People have third party\ncontractors and they try and access your\nsystems. You have to give them a laptop\nand you have to be secure. And we saw\nthe emergence of companies building an\nagentic sorry a secure browser\nisland or talon for that matter. Right.\nYes.\nAnd I said to my team, hey guys, this is\ngoing to be important. There's a browser\ncoming. There are people building it. I\nknow we've had browser fakes as in head\nfakes in the market. People have thought\nabout browser going to take over the\nenterprise many times. But I said this\ntime it feels real.\nSo my team is always like you'd expect\nfrom any engineering team would came in\nand showed me a plan saying 60 engineers\n9 months we'll give you a great browser.\nWe'll be you know we'll get to where\nthese guys are.\nAnd I said what do you expect? These\nguys just hang out wait for you to catch\nup with the next nine months. They'll be\nagain nine months ahead and their team's\nworking. They're going to add more\npeople.\nSo we ended up acquiring talent. Now\nwe spend some time\nrefactoring it, aligning it with our\nplatform because remember the browser\nhas two parts. The one part is the\nbrowser itself which is the refactoring\nof chromium etc. The second part is\nattaching security services for it to be\nan enterprise browser. Now what both\nTalon and their competitors are doing is\nthey're buying third party security\nservice and whoever give it to them so\nthey could do focus of browser part. We\nhad the third party security services.\nSo we have premium third party security\nservices which we can connect to the\nbrowser. So we did that in the case of\ntalent and then we combined that with\nour sassy product. So we were able to go\noff the races from the go to market\nperspective saying listen we have a\ncomprehensive solution you can get\nremote browser isolation you can get the\nbrowser you can get a VPN client you can\nget all of them with one security fabric\nacross the board that allows us to be\ndifferentiated from our competition for\na long time now as you can see perhaps\nit is the right bet or the market\nbelieves the right bet because the\ncompetitor is valued so highly that for\nanybody else in our space to compete\nthey have to put out 8 to10 billion to\ncompete with us. So that allows us a leg\nup now and I think you know where it's a\ncomprehensive solution requirement\nthere's nobody but us. If somebody's\nwilling to take just a browser then\nthere's another option in the market.\nOkay. In in that particular case you buy\na very hot company.\nYes. Hot technology. What was not clear?\nWe paid a lot less than what the current\nvalue is. We paid like $600 or so.\nOkay. Um in the current market anyone\nyou're buying it's expensive and the\ntalent's expensive.\nYes. Uh, one thing we ask ourselves at\nHubSpot is we buy this company, we want\nto retain this talent and they're\nincredibly valuable outside and it's\nincredibly valuable to them to start a\nnew company.\nAre you doing creative things\ncompensation wise to to the founding\nteams, the engineering teams to try to\nlock them in so they don't jump at the\nnext huge pay package?\nYeah. So, you know, we've had experience\nnow doing this north of 25 times and we\nhave a simple rule and we've learned\nthis over the years. This was not the\nfirst time we did it. Like the first\ntime we did it, we were like, you know,\nfumbling through this. But is there some\nfundamental principles which I think\ndistinguished ourselves from what people\nhave traditionally done in M A.\nOkay.\nOne, I have a simple rule. These guys\nkicked our ass in the market with less\nresources, move faster than us.\nSo they must know things better than us.\nSo they have to come and run this\ninstead of our people. Traditionally,\ncompanies say, \"Oh, meet my senior VP of\ncrypto.\" And he bought a crypto company.\nYou're going to report to him. Well, the\nsenior VP of crypto should have kicked\ntheir ass. we have given the resource\nthey wanted. So the founders become the\nbosses of our people as opposed to the\nother way around which our people find a\nlittle unnerving to be fair\nI would imagine.\nAnd but the founders find that\nrewarding. That's one. Two um we say how\ncan we help you accelerate your business\nbecause we are going to have a drag on\nthem for sure. We're a larger company.\nWe will slow them down in some cases\nperhaps with our processes perhaps it's\nother way. So the first question is how\ndo I accelerate your business? typically\nis get me more engineers right I want to\nmove faster or let me do this\nnow the third thing we do is\nwe spend the diligence period designing\na joint product roadmap\nokay\nwe didn't do that the first two times\nokay\nso when we bought the company the\nfounder said dude thanks for the money\nand thanks for letting me come here but\nI want to build what I want to build\nlike dude no I just paid you a lot of\nmoney you're going to build what we\nagree I'm happy to agree with them and\nif you don't agree good news is you\ndon't have to sell to me\nokay\nso we design an agreed product roadmap\nbefore we sign the final term.\nOkay.\nAnd the most importantly asked the\nquestion on talent, right? Again, I say\nwe're buying half product and most\ntalent\nbecause these things are three years in\ntwo and a half years in. I think it\ntakes four to seven years to build a\ngood product in tech. So, we still have\ntwo three years to go. I think the shelf\nlife or halfife of founders is about 3\nyears in the company.\nAnd do you do a three-year vest or\nsomething?\nSo, we do unvest.\nOkay.\nWe tell the founder, we're buying your\ncompany.\nYeah. You have to uninvest half your\nstock.\nOh, that's brutal.\nThree years. But we will top it off\nbetween 25 to 40% depending on, you\nknow, the economics that are at play.\nI see. Okay.\nSo, we'll give more equity to them.\nI see.\nThat's the only time I can give them\ntremendous amounts of equity because\npart of a structured deal.\nI see. And what about a frontline\nengineer who's just really good? Like\nyou've got, you buy a company, it's got\n30 engineers, the founders is one thing,\nbut all those engineers are really smart\nand have domain expertise. Do you do\nclever things with them? Do you roll\nthem back?\nWe roll some of them back. Some of them\nare newer to the company than the\nfounders. So usually they have an year\nyear or two remaining. We generally try\nto lock them in for the first three\nyears.\nThree years. Yeah.\nAnd then what percent do you think leave\nafter 3 years\nroughly?\nYou know if you think about founders\nsome bizarre reason there's typically\nmore than one in tech. There's usually\ntwo on average.\nUh usually one of them works harder than\nthe other one.\nOkay. uh and you'll find that look\naround you think about think about all\nthe tech companies which have gone\nthrough the process of multiple founders\nthat eventually success whether it's a\nFacebook whether it's you know yeah\nYouTube you look around you all these\ncompanies where there were multiple\nfounders eventually there's one founder\nfront and center\nand the other founders sort of don't\nwant to do that and they go off and do\ndifferent things so typically you'll\nfind that in every stage of a company\nyou'll find a four-year-old company\nwhere one founder is working hard rarely\ndo you find a company where all two or\nthree founders are working equally hard\nbut anyway let's assume that there's one\nor two it doesn't matter in this for\nthis for these purposes right those\nfounders are the ones we will then find\na way to work with to find the identify\nthe engineers that are needed I think at\nP alto I want to say the primary\nfounders have almost all lasted the\nthree years we've asked them to last and\nthere are a few who lasted longer\nthere's some founders who made more\nmoney being part of Palato than in the\nseven years they ran\nincredibly well yes\nyeah but if you get a lot of stock at\nPalto we say you can't sell it for two\nyears sometimes to do a lot better.\nYeah.\nThan than they would have done if they'd\nhung on to it.\nYeah.\nOkay. Related to this, like at HubSpot,\nwe do some version of horizon planning.\nH1, near-term, H2, H3.\nHow do you guys do that? And how do you\ndo it when like shit's changing so fast\nright now? Like it's really sped up. How\ndo you guys think about that? Where does\nM A kind of fit into all that\nor do you not do it at all? I'm trying\nto interpret your version of horizon\nplanning in terms\nwell like at HubSpot we look at our our\nlike what is HubSpot going to look like\nin a year we want 70% of our resources\non this is the next year we want 20% on\nstuff that's two three years out we\nactually want 10 on stuff that's going\nto be 5 years out\ngot it got it\num yeah um we do it uh because we have\nnow multiple platforms in each platform\nthere's a core part of the platform\nwhich is where typically 60 to 70% of\nresources are deployed because you're\nconstantly adding features constantly\nadapting to certain customer\nrequirements. There's 10 to 20% of the\npeople who have to be working on new\nfeatures to be launched, right? I want\nto see a 12 to 18 months rolling road\nmap saying what cool thing are you going\nto show me? Because if you're not\nworking on some cool thing, somebody\nelse is. So there's a team that works on\nthe cool things. And then there's the\nthe 5% is the hardest part.\nThe fiveyear out problem is the hardest\nproblem because\nthat's where I think is where we end up\nrelying on M A.\nYeah. where there are people out there\nthanks to the thriving venture\ncommunity. You guys are doing such a\nwonderful job in seeding all these\nresearch labs that I still see a few\nhundred companies a year and the good\nnews is they're so great they come and\nshare what they're working on their\nideas because you know I share the view\nif I was so smart that I could take\nsomething from a startup and go build it\nfaster than them then they shouldn't be\nin that business anyway.\nFine. Um, a lot of the founders I coach\nare building apps and are trying to go\non to their second app and want to build\na platform. And there's this saying\nkicking around either you you are a\nplatform, you get eaten by a platform. I\nfeel like under your watch, PaloAlto\nbecame a multiplatform company.\nAdvice to founders thinking about second\nacts, thinking about going from, you\nknow, a point solution to a platform.\nLook um we didn't start as a platform\ncompany. We started as a firewall\ncompany. Yeah. When I came to Palato,\nyou know, the last major innovation that\nwas launched to the markets was four\nyears before I arrived.\nAnd they hadn't done a lot of launches\nbecause they're very happy with the fact\nthat firewalls were selling and we had\nfour subscriptions and there was amazing\norganic growth.\nYeah.\nI said then what's the next act? What\nare you going to build?\nYeah.\nNow that's where it becomes important to\nhave some guidelines as to what's\nuseful, what is not useful. So I tell\nyou a funny story. I was sitting in the\nroom and I knew nothing about cyber\nsecurity and I'm sure we'll talk about\nthis\nand\nI said to the head of product legal I\nsaid so what are people working on like\nwhat's going on what are people working\non we haven't launched anything for a\nwhile I said well you know we have this\nbig release we do every year which is a\nsoftware release for all of our\nfirewalls I'm like that's great so what\nare what are these people doing this\nmust be like 5 600 engineers so Jesse\nRston our head of engineering came in\nand he brought two of his colleagues\nhe's meeting the new CEO and he's going\nto tell him what to do so I said what\nare you working on I was very excited he\nsays okay\nI'm working on 60 new features for our\nnew software for for a new software\nupgrade for the firewall. I'm like,\nthat's cool. Is that going to help you\nsell more firewalls? I don't know.\nThat's kind of like sounds like a lot of\nwork for 600 people. And I'm like, so am\nI going make money? I know we're going\nto sell more firewalls. Okay, that's do\nme a favor. Three, if you're working on\nit six months like I said, here's the\nmarker whiteboard. Just write down the\n60 features.\nSo, they got exhausted after 37.\nOkay.\nI said, you do realize we've got a\nproblem. He said, what's the problem? I\nsaid, \"I got sales people out there.\nThey got to sell this stuff. You're\nbuilding it. You're smarter. You can't\nremember past 37. How the hell am I\nsales people going to learn 60 new\nfeatures which are going to be for\nfree?\"\nNo way.\nThis is the problem. And this is tells\nyou how how marginally competent I was.\nIn on that 37 things, there were seven\nlines which said DNS on them. That seems\nto be a bit thematic. Talk to me about\nDNS security. So, they told me about DNS\nsecurity, told me about infoblocks, told\nme about all the stuff that was going\non. I said, \"So, can we replace a DNS\nsecurity vendor if we do this?\" Oh, no.\nWe've solved 60% of the problem, but the\nother 40% is harder and requires a\nlittle more work than what we can do in\nthe OS. I like 60% not good enough, bud.\nLike, what am I going to do with the\nother 40%. So, that day we redirected\nthe rest of the effort for the next four\nmonths into making the DNS security more\nrobust. That was the first piece of\ninnovation we launched at Palato.\nThat was your second act.\nThat was my first or first act company's\nsecond act.\nWell, that was the beginning of the\ncompany's second act. The reason I tell\nthe story is\nthat was the beginnings of the idea of a\nplatform. Which means if you have a\nfirewall which is being deployed by our\ncustomers, they trust us to go in and\nget inline. They buy four subscriptions\nfrom us. What other sliver feature\nindustries as part of our ecosystem can\nwe eliminate by giving them a fifth,\n6th, 7th, 8th, 9th to 10th? So actually\nover the course of the last seven years\nwe launched six others. So we have 11\nsubscriptions now that can be sold on\nthe platform. I.e. you buy the hardware\nbox and now I can do 11 different things\nwhich are all 11 billion you know\nlateral markets that get consolidated on\nthe platform.\nSo that was kind of the beginning of the\nidea of a platform.\nBut\nI sat there and said how many cyber\nsecurity products are there? There were\na lot. There are five swim lanes. There\nare many products. And I said we're only\nin one magic quadrant. Looks like this\nis something important. I was like\nfeeling my way through cyber security\nthrough enterprise. Like why can't we we\nbe on more magic quadrant? So today\nwe're north of 24 magic coordinates.\nThat was great. So we're very good, very\nwell done. Lots of point products sold\nby produced by Palo Alto. And they said,\n\"By the way, the problem is each of\nthese require their own validation,\ntheir own specialists, their own\nconvincing the customer.\" I said, \"This\nis not how we're going to do it. Let's\nmake sure now that we have 24 great\nproducts. We stitch them that they work\nbetter together.\" Yeah.\nWhich became sort of the next push\nbehind platformization. So\nwhen was that? This was about three\nyears ago when we started stitching them\ninto three platforms. Our network\nsecurity platform, our cloud platform\nand our our cortex sim platform and then\nyou discovered that when we talked to\ncustomers about the platform, it was\nopen season. There was nobody else in\nthe conversation cuz we were going and\nsaying listen, we don't want you to buy\njust a point solution. Look, these six\nthings work together. And once we get\npeople convinced on the platform, then\nthey start a journey and moving to Palo\nAlto, which is great because we have\nvery low churn on our platform sales and\ntheir customers are happy. They get\ndeployed\nand they would never rip out a platform\nand go back and say, \"Oh, let me go\nbuild six point products and go to\nreplace Pala with those six point\nproducts.\" So, it kind of worked out,\nbut you can't start there.\nYeah.\nYou have to start with an MVP with\nsomething that's innovative that's going\nto make you win. And then customers you\nget their trust and say by the way I\nalso do this and what I do here is also\nas good as everybody else if not better.\nYes. You have to get to table stakes at\nsome level.\nThat's right. And that's where if you're\nbuilding the next app if you have one\napp the question is what is a lateral\napp where you to use the cliche 1 plus 1\nis three. If your app and this other app\nworks together does it create a better\noutcome and does allow me as a customer\nto replace that? when you're you're\nplanning this stuff,\nhow much of PaloAlto is you or your team\nlooking around a corner versus, you\nknow, we just got to listen to customers\nabout what customers want.\nThat's a tough one. You know, you want\nto say we listen to customers, so we do.\nYes.\nUh but my customers are not going to\ntell me that browser's next.\nYep.\nRight. I literally we had our summit\nlast week in Napa and we had a bunch of\nCIOS there and literally showing them\nthe browser, showing them the value of\nthe browser and you know they oh my god\nthis is cool can you spin up one for me\nliterally spinning up tenants for our\ncustomers to try the browser and they\nlook and say holy [ __ ] why are we not\ndoing this stuff so they wouldn't be\ntelling me because they would tell me\nthe 27 reasons why browsers never worked\nin the enterprise for many years but now\nI tell them really you don't think in\nsix to 12 months from now you'll have\nmultiple agentic browsers who will want\nto take over credentials and do tasks\nfor\nand you don't want to find a way to\ncontrol them. Oh [ __ ] you're right. We\nbetter go get our act together and go\nfigure the browser stuff up. So I think\nmany cases you end up with customers who\neither will tell you incremental\nfeatures. Like I had a customer once I\nwas sitting there and saying listen\nwould like you to take this uh network\nsecurity platform from us and by the way\nwe have telemetry, we have metering, we\nhave observability in the platform and\nwe have all these cool things in SDWAN.\nAnd he says, \"Where do I manually do\ntraffic steering in your platform?\" I'm\nlike, \"You want to do what?\" So, I want\nto do manual traffic steering. I'm\nsaying, \"You run a very large network.\nYou actually believe you have the mental\ncapacity in your team to do manual\ntraffic switching.\nThere's no such option.\" Now the problem\nis the risk is sometime this one was\nobvious but the problem is there are\nmany times the customers ask you for\nstuff that is something they're used to\ndoing in a different product or a\ndifferent way and now you're suddenly\nworking backwards creating backward\ncompatibility. So you got to watch out\nfor what the right balance is between\nsort of you know\ndon't listen too hard. Yeah, you have to\nadapt to their requirements to some\ndegree so you can make their stuff work.\nBut you got to be careful about getting\nfull feature knowledge about the future\nbecause you take the example the reason\nby the way this is this is pertinent to\ncyber security cyber security founders\nhave this strange affliction they will\nstart building and they want to go out\nthere and talk to customers as quickly\nas they can. It's like literally three\nsix months in they're talking to their\nbuddy CESOS have these customer advisory\ncouncils. They bring all these people in\ngive them some advisory shares. I ask\nthem what do you think? Now typically\npeople who have their free time are\nlarge enterprise sees or CIOS. So\nthey'll hang out with you, they'll come\nto your offsite, they'll give you\nadvice. Large infrastructure people\ndon't want UI.\nThey want speeds and feeds.\nSo typically they point the founders\ntowards speeds and feeds.\nFounders feel really happy. Oh my god, I\nbuilt speed and feeds and look this bank\nis using me because this bank's got\n15,000 engineers. They want speeds and\nfees because you found some threat\nvector and they'll take the speed and\nfeed put in their system. The problem is\nthat's not a product. That's not a\nproduct an enterprise can deploy or work\nwith or use effectively. So many\nfounders get trapped in this idea that I\nshould get customers as fast as I can. I\nshould ask them what they want. I think\nit's worthwhile. The best founders\nshould actually spend some time build a\nproduct based on their own vision, show\nan end toend point of view and solve a\nreal problem. That was the case with\nHubSpot. We built stuff that\nfirst of all investors thought we were\nstupid.\nVC.\nI'm sure they love you now because you\ndid a great outcome for them. So\nwe did our series A.\nIt's easy to change their mind.\nCustomers a little harder.\nYes, we did our series A was five on a\nsix pre.\nGive away a lot of the company series A.\nThat sounds like a like a angel check\nright now.\nYeah, totally. Um, as I listen to you\nand I think about your journey,\nthere's a couple things I think are\ngreat and unusual about you. One is they\nhired you from the outside and you\nweren't a security guy and you had to\nfigure it out.\nI wasn't an enterprise CEO either,\nright? And so\nI have a lot of questions along this\nline, but you figured it out. Like\nyou're in meetings with your team with\nthe team and\nI'm sure in a lot of meetings you know\nwhat the hell they were talking about.\nI still have that sometimes.\nI guess uh how do you walk that line?\nHow did you learn? How did you keep How\ndid you not lose credibility and have\nthem eye roll at you?\nI think all of that was has happened.\nI'm pretty sure I'm pretty sure the eye\nrolling's happened. I'm pretty sure some\nleft. It's still happening. Well, you\nknow, a little less now\nbecause uh like you said, the stock's\ndone well, the company has done well.\nSo, people like to win and they figured\nthat somewhere in my madness there is a\nway to win. So, they go with it and give\nme the benefit of doubt because it's\nworked out so far. But, yes, if it\ndoesn't work for a while, they start\nwondering what the hell is this guy\ndoing again. So,\nyeah. When you first came in though,\nlike\nyou didn't know a lot about it. Like\nwhat was it?\nNothing. Let's be clear. This is you\ndon't have to be polite. I didn't know\nanything. Okay. I literally thought\ncyber security was two different words.\nSo I didn't know it was one word. Okay.\nRight. And I walked in and I'm talking\nabout like executive security or\nwhatever. Like I didn't know what cyber\nsecurity was. And I'm sitting there and\ntalking to to you know our friend Jim\nGats or Ashim Chana who were part of the\nhiring committee. Yeah. I think I got\nhired because he had risk-taking venture\ncapitalist nomination committee which is\na good lesson by the way for companies.\nThey should have some people who have a\nhigher risk appetite in their non-gov\ncommittees to hire people because\notherwise you fall into the trap of very\ntraditional people who are checking\nboxes to hire people and they don't\nI violently agree with that.\nYes, I think so. That's kind of an\ninteresting you know and of course\nand generally nom and gov people are not\nrisk-seeking types of people.\nBoards are not right. I mean public\ncompany board you're getting paid\nnothing right? You have zero appetite to\ntake risk. You can only get into trouble\nfor making a bad decision. You don't get\nrewarded for making a good good\ndecision. So what do you do? You risk\nmanage.\nSo and risk management, you know, the\nthe most riskmanaged portfolio is the\nS P 500. It gives you market returns. So\nyou risk management hiring, you end up\nwith market returns. That's a good\noutcome.\nWe have a section in our board meeting\nonce a year. It's erm enterprise risk\nmanagement.\nAnd my co-founder made a joke. He said,\n\"Those are your three those are your\nthree least favorite words in the\nEnglish language.\"\nI think we have one of those, too.\nYeah. You didn't know what you're doing.\nYou joined. How did you How did you What\nthe hell were you doing?\nFirst of all, why did you take the gig?\nYou know, I uh was home for a year and a\nhalf and you'll be surprised. Not many\npeople want\nCEO from the outside for a substantive\nbusiness. Usually, they're very broken.\nAnd you sit there and say, why would\nanybody touch this job? So, you don't\nwant those. uh or they have currently in\nthe current tech environment usually\nthere's a founder who doesn't like doing\ncertain parts of their job and they want\nto hire someone to do that part of the\njob but they still want to be around and\nrun the company and I've been there done\nthat take the box\nand then you sometimes you find these\ngems where which are fully public\nthere's no controlling shareholder the\nfounder has never been CEO doesn't want\nto be CEO he wants to be a technologist\nand he's and it's a well-run company\ndecently run company it was you know\nMark Mclofflin my predistor was amazing\nguy he built this on a very high\nintegrity culture Sure. So you had\nsomething great to work with from from\nsort of the the the bones of it and then\nyou're in a market which is going to be\namazing because cyber security is a\nmarket which is going to keep growing as\ntech keeps growing. Cyber security is\ngoing to keep growing and then the sort\nof the icing on the cake is like it's\ngot one and a half% market share which\nmeans this is an industry ripe to\nconsolidate in some way shape or form\nwhy can't there be a 10 or 20% share\nplayer in this space which is which is\ntraditional for most tech. That was my\nthesis walking in. So I actually didn't\nstudy cyber security to understand Palo\nAlto. I sat there and say how does\nenterprise companies work. If you do\nenterprise math it kind of falls into\ntwo very simple places right. So any\nfounder is thinking about scaling their\ncompany\nhas to think about two different\nscenarios. One scenario is it works in\nthe I call it productled growth model\nwhere you build a great product people\nadopt it your cost of sales are\ndimminimous whether the Atlassians the\nworld or the Adobe one part of their\nbusiness or the Dropbox is the world\nthere's there\nand they they usually struggle to do the\nlarger enterprise deals because the\nproduct's not designed for that as well\nthe enterprise guys want way more\nfeatures want way more adaptation so\nusually end up doing really well in the\npackaged software packaged solution\nbusiness. and it with some sort of\nlittle dials but your UI is pretty\nbecause you want to convince customers\nyou're almost like a consumer company in\na product like that's kind of one part\nof the business that's good because if\nyou look at the other side I have very\nsimple maths you know so I'm like\nlooking and saying look if you look at\nthe enterprise business sub billion\ndollars your cost of sales marketing and\nsupport is 60 to 80%.\nYeah it's huge\nthat's what it is the rest of it is only\n20 to 30%. And even at scale that goes\ndown to 18 to 25%. So there's not much\nspread there. All the profit is made in\noptimizing that 80%.\nHow do you do that without crushing\ngrowth?\nThat's a good question.\nThank you.\nYou don't you don't crush growth. You\nneed to be of a certain size and scale.\nSo the first thing I did uh amongst many\nthings is I took our operating margin\ndown from 20 plus% to 17%.\nI actually invested 500 basis points\nmore into growth. like we're too we're\nnot investing enough.\nRight? So that like that coupled with no\nknowledge of cyber security really made\npeople's eyes go like oh [ __ ] this guy\njust walked in wants to hire more\nengineers buy more companies use up the\ncompany's cash and reduce our operating\nmargin. That sounds great.\nYeah. Okay.\nLet's start\nreally popular.\nVery popular. And then I walk in I\nliterally just walk into the company\nlike what am I doing here? To your point\nthe first six months I didn't know.\nDid you feel that way?\nI did.\nYeah.\nI walked in but remember I I I'll tell\nyou a different story. So this was\ntaught to me by a fund manager. My first\njob in the United States. Well, my first\njob which I loved was I was a buyside\nanalyst and I walked in and my job was\nto analyze stocks in front of stand in\nfront of very opinionated portfolio\nmanagers and tell them why to buy the\nstock.\nYep.\nAnd it didn't really matter. I mean,\ncome on. You're reading about the stock.\nThere was no chat GBD to summarize stuff\nfor me. There was no Google search. Then\nyou had to go read a bunch of financial\nreports, put it together, do a\nspreadsheet, put a model together and\ntweak some numbers and say, \"I think we\nshould buy the store.\"\nY\nand you have to do that based on some\nspeeches of the CEO and CFO had made or\nyou'd met them once for half an hour.\nThat's kind of like pretty out there to\ngo do that stuff. Anyway, we did that.\nThe problem was two weeks later they\nwould do something different than your\nthesis. Now you had a choice. You could\nchange your opinion based on that and\nget buffeted by that and go to the port\nand say, \"Hey, I was wrong. I changed my\nopinion.\" and then two weeks later do\nsomething else. Or you could have to\ndeal with all the uncertainty inside and\nstill maintain your thesis on some way,\nshape or form. So you had to decide what\na long-term thesis was and deal with the\nuncertainty amongst yourself without\nmaking it visible. That's what I learned\nwhen I was way younger than today. I\nsaid kind of like walking into politics,\nI felt the same way. I said I had to\nkeep my insecurities inside me. I had to\nkeep my my convictions inside me. Sort\nof be like a duck, you know, like be\nserene on top but paddle furiously\nunderneath and try and get my [ __ ]\ntogether. what I was trying to do and I\nused to call near Zuk our founder either\nin the morning or in the evening on my\nway to or from work and I used to call\nLee Clarage the chief product officer\nthe other time and I'd spend half an\nhour 45 minutes asking them all kinds of\nquestions and then I'd call Mark\nMclofflin sometimes because he was still\navailable as an adviser board member I'd\ncall Ashim I'd call Jim I'd be calling\nthese people all the time I don't know\nhow many phone calls I've made\nI saw 300 plus cyber security startups\nin the first six months I was there\ncuz I was just trying to learn absorb\nso that allowed me to start building a\nmental framework as to how this thing\nshould work. But I knew we were subscale\nless than $2 billion in revenue with SBC\nnorth of 15%. We were not set up as a\ngood long-term public company. And\nwatching the, you know, the the half\ncycle of a cyber security company is 10\nyears.\nIn 20 years, they're gone.\nYeah.\nSo, we're already past our halfway mark.\nYeah.\nSo, I'm like, oh my god, this is a this\nis a known formula. You take a look at\nthe semantics, the McAfei of the world.\nThere's a whole bunch of, you know,\ncarcasses in enterprise which didn't\ncross the 1015 billion Rubicon of market\ncap. So, we got to go get past that. The\nonly way to get past that is to grow our\nway out of our space in the market. We\nwere one of seven companies below $20\nbillion, above 10.\nYep.\nLike we got to get past this 20, 30, 40\nbillion mark because we can that the\nonly way to get there is through revenue\ngrowth. Once you get revenue growth,\nthen you can start worrying about\noptimizing your sales and marketing cost\nbecause then you can see how to. So my\nonly focus when I started buying stuff\nwas I'm listen to a customer and you\nhave an expensive salesperson most\nexpensive resource and they walk and\nsay, \"Hey, would you like a firewall\nguy?\" I said, \"I just bought one.\" I was\nlike, \"Oh [ __ ] I can't go back for\nseven years to this guy.\"\nTotally.\nSo your conversion rate is very low. But\nsay you don't want a firewall, you want\nendpoint security. If you don't want\nthat, you want some cloud security. You\nwant that? You want some SDWAN? I got\nsomething to sell you. Yeah.\nBut just it's higher conversion.\nadvertise my sales people a lot easier.\nSo, that was a very simple insight I\nwalked in with saying if I can sell more\nstuff to the same customer,\nthere's a higher probability I can get\nthrough my operating margin dilemma.\nBack to you.\nYes.\nIt sounded like you have a little or at\nleast had imposter syndrome and you hit\nit pretty well.\nI have it. I have it right now actually.\nI'm nerv I'm a little bit nervous\ninterviewing you.\nOh, you shouldn't be nervous. like is is\nis\nwe all have\nthe fear of what we don't know and fear\nof making a wrong choice. Um there's a\nbalance. There are some people you can\nshow your willingness to adapt or\nuncertainty if it depends on how you\nwant to call it or the respect for their\nsuperior knowledge. Um and then you have\nto hold it off from the others. So with\nNear and Lee, I was very comfortable\ntalking to them or Mark, I was very\ncomfortable talking to them about what I\nwas learning because they needed to\nunderstand. They were aware of it. And\nby the way, they were they knew when I\ninterviewed the first time when they\noffered me the job, I said, \"Actually, I\nwant another another set of interviews.\"\nThey're like, \"What?\" I say, \"Yes, I\nwant to go back and talk to Ne and Lee\nand Mark.\" So actually, when the job was\noffered to me, I said, \"Hold the offer.\nI'm going to go back to talk to them\nbecause the last time they were\ninterviewing me. This time I want to\ninterview them.\" So I went back and I\nsaid, \"Listen, guys, you do understand\nwhat you're signing up for. I do not\nunderstand cyber security. You get it?\nThey're like, \"Yes, we get it. We have\n5,000 people who do.\" And we're still\ntrying to make sense of it. I said,\n\"Okay, that's good.\" One, I said, \"Two,\nremember this is going to be one\ncompany. It's not going to be one sales\ncompany and one product company. So, I'm\nnot coming to fix sales. I'm trying to\nrun the company.\"\nMhm.\nSo, I literally had Lee and Ne commit to\nthe fact that they were signing up for\nthe unknown entity known as Nikash, who\ndidn't know anything about cyber\nsecurity, and they'd guide me and work\nwith me for me to get to a place where\nwe can make this work. So I was very\ncomfortable with sharing with them what\nI was learning, what I didn't know. And\nthat kind of gave me some comfort and\ncourage. But you can still walk into\nmeetings where you have a distinguished\nengineer sitting there saying, \"Who is\nthis guy just why did he show up here?\nAnd why does he get the big bucks to go\ntell me?\"\nYou showed it to a small circle, but to\nthe company, you didn't show that\nimposttor syndrome.\nNo. Um,\nyou showed a face of somewhat confident.\nI was learning. Look, we I joined in\nApril, September. We didn't analyst put\nout a target saying do a billion dollars\nof next generation security ARR which we\ndidn't have a next generation product we\ndidn't have anything we have sales\npeople were going to build a billion\ndollar AR business in three years we\nbuilt a larger than billion dollar\nbusiness in three years so sometimes you\nknow you I think look in my rule is very\nsimple I did this before I used to work\nat T-Mobile I took a job at Google I\ntook a pay cut and I didn't know how to\nsell advertising I didn't know what ad\nhow advertising was sold I ran Google\nEurope we all sold advertising I had to\nfigure it out. And my view for everyone\nwho's listening or every CEO or founder\nis in the early part, swing big. Swing\nbig, you fail big.\nIf you're a new new CEO,\nwhy not swing as hard as you can, right?\nTake three swings. Who cares? At the end\nof the day, if it works out, it's going\nto work out spectacularly. If it doesn't\nwork out, pack your bags and move.\nOkay, let me ask it related I have like\na million more questions, but related to\nthat,\nwhen we would hire people at HubSpot,\nYes. And we had this thesis like give\nthem a lot of time, let them interview\nand slowly come up to speed. But\nactually the current CEO of HubSpot\njoined like the week before co and she\ngot thrown into it and she did great.\nWhat is your sort of philosophy on that\nkind of thing?\nLike you got thrown in.\nYeah.\nAnd you went after it. You're you've got\nan amazing exec team there. You bring\nsomeone in from the outside kind of slow\nroll them or you throw them in the fire.\nLook, it's very hard to\nfly a plane by sitting next to the\nperson flying the plane.\nYeah.\nSo, if you are going to fly the plane,\nif you're competent, you know how to fly\nit, you got to go sit in the pilot seat.\nSo, you can't like slow roll a CEO into\nthe role. Now, look, when I took the job\nat Google for 3 months, I didn't\ndecide anything.\nI just said, \"You guys keep doing what\nyou're doing.\" Look, most companies will\nrun for two, three months without\ninterfering, anyone interfering. Like\nthe biggest decision I had to make when\nI walked in was, \"Oh my god, it's\nperformance season. We have this money\nleft on our equity budget. We like to\ngive it like in India.\" I said, \"Sure,\ngo right ahead.\" And then I had to go\nfight SBC out. So you I got I had to pay\nfor my bad decisions. But the point is I\ndidn't have to make any important\ndecisions for those first three months.\nThings were working. People want to do\ntheir jobs and it ran in a very\nnon-interfering way. So I think most\ncompanies\nshould be able to run 3 to 6 months on\nautopilot within reason. M\nbut after 3 to 6 months the lack of\nstrong decision making in those periods\nstarts to show up you starts having\nimpact right so hopefully your\npredecessor set it up in a way that is\nstill rolling on good decisions that\nwere made before now you got to go jump\nin and see which decisions do I need to\nmake so I think there is some time that\npeople can take to figure stuff out\njust kind of back on you personally you\nstrike me as I don't know you super well\nbut you strike me as being very calm and\nyou don't seem stressed out and I coach\ntons of CEOs are like all the SEOA CEOs.\nThey're stressed. Um\nstressed for what?\nThey're just stressed like existential\nlevels of stress. Like am I correct?\nYou're you don't you strike me as a\npretty cool customer.\nMy my work doesn't stress me.\nHas it ever or did it in the beginning\nand now you kind of got your legs under\nyou?\nNo, my work's not stressed me. And you\nknow, even my wife wonders like where do\nyou get the conviction from? Like\nwhere do you get it?\nI had no belief in myself that\nwhere did that come from?\nMaybe growing up,\nmom, dad.\nIt's It's kind of like I was that kid. I\nwas that kid who get home on time, get\nmy homework done, not worry about my\nparents telling me to do it, you know,\nmake my bed, be the good kid, and get\n[ __ ] done. And it's kind of like, you\nknow, in a way, sometimes your parents\nactively encourage you. Sometimes they\ndon't interfere and they let you do your\nthing because you believe but you know\nthey have your back.\nSo I think knowing that somebody has my\nback and I'm well protected, well\ncovered is usually what's made me do\nbetter. And at Palo Alto, the best part\nis I have an amazing board and I know my\nboard has my back.\nAnd I think that's kind of important in\nany management lesson, whether it's a\nboard, whether it's a CEO or their\ncolleagues or whether it's whoever\nyou're a manager, your people need to\nknow you have their back\nbecause if if it's kind of like, think\nabout it like if you're if you're\nhanging out of a plane and you know, if\nyou're like doing something and\nsomebody's else is holding the rope, you\ngot to believe this person's going to\npull me back in when things get rough.\nIf I trust that person's gonna pull me\nback in and protect me, I will go flail\nand do whatever I need to do. So, I've\nalways felt that when somebody's had my\nback, I can do well. What's the worst\nthat could happen?\nGot it. You kind of you a bit a lot of\nyour career, you running sales\norganizations.\nFunny enough, you\nor go to market orgs.\nWell, let's see. I was an analyst.\nYou ran Google Europe. That was sort of\ngo to market.\nYeah. But it's kind of interesting. I\ndid run Google Europe. Yeah. But when I\ninherited Google Europe, we were 20% of\nthe company's revenue.\nYeah.\nWhen I left, we were the largest\nbusiness of Google, which is very rare\nfor an American company to have a larger\nEuropean business than US business.\nSo, I had to come back here and increase\nthe growth rate here in the US. So,\nbut you don't do that by being just a\ngoto market person. You have to run a\ncrossf functional play because it's kind\nof like if the marketing is not doing\nwell, it's impacting my business. How do\nI get marketing? So as the only guy go\nto market guy at Google who marketing\nreported to ever\nbefore me marketing reported directly to\nyou know my boss and after me marketing\nreported to the reports to the CEO when\nI was at Google both marketing and sales\nreported to me so you have to be able to\nrun a cross functional playbook if you\nwant to be successful.\nOkay but I guess my question to you is\nlike I look across the industry\nthere's not a lot of kind of people who\ngrew up and go to market as as if I'm\ngrown up yet, but uh let's let's go\nback. I started my life\noff\nas a Bill Mcderman at Service Now. I\nkind of throw youish in that bucket.\nThere's very few. Why do you think that\nis?\nYeah, but I see I don't see myself as a\ngo to market person.\nI can do go to market. I'm not a go to\nmarket person.\nOkay.\nI am\nYou're an athlete.\nI spend 50% of my time in product. M\nbut you grew up running big go to market\norcs. You grew you did a lot of stuff.\nI did all kinds of stuff. I was a\nanalyst. I was chief marketing officer.\nI was a product guy at T-Mobile.\nI I did it. I I wrote code when I\nstarted Fidelity. So I kind of like\ndid a whole bunch of things badly and\nthen eventually they decided I wasn't\ngood at one thing. I got to do\neverything.\nI'm a VP at XYZ company right now.\nYes.\nAnd I want to be CEO of a scaled\ncompany. I don't want to found a\ncompany. What advice do you have for me?\nUh, get lucky.\nI think I'm I'm luckier than than good\nin some of the scenarios. But like on a\nmore serious note in Silicon Valley,\nmost companies which do which lose sight\nof a product focus over time die.\nYeah. So that's why I'm I'm fighting you\nin characterizing me as a goto market\nperson because I don't see myself as a\ngoto market person versus other people\nwho've named a lot of respect for Bill\nand Mark. They're probably the two the\nbest sort of sales leaders in the world\nfor the enterprise business. But\nI'm not them. I'm not as good as them at\ndoing what they do. But I think I\nbalance product and go to market well\nenough that allows us to run as a\ncohesive company.\nI build product half the time. The\nacquisitions are done by me and a bunch\nof people. I don't have an acquisitions\nteam. It's me. Oh,\nI sit down with the CEOs. I look at the\ntech. I look at all the\nSo,\nbut this is something I learned at\nGoogle. Larry Page had a very clear\nview. Companies that don't focus on\nproduct lose sight of product. And like,\nyou know, the the best compliment is the\nworst sort of compliment Larry ever gave\nme. Says, \"Oh, no company in tech failed\nbecause of sales. You're running sales.\nI don't have two hours. If I had two\nhours, I could make you do your job\nbetter, but I have to go focus on\nproduct because that's why companies\nfell.\" So, he just told me to go away. I\nthink it was a compliment. I think he\nmeant I'm doing my job well, but he did\nsay that Bill Campbell and Eric Schmidt\ntold me, \"Do your job well, so go do\nwhat you're doing and don't waste my\ntime because I'm focusing on product.\"\nBut he kind of told me to go away. And I\nI believe what he said like if you don't\nmake sure you're you're obsessive,\nparanoid about your product, you're\ngoing to fail in the medium term and you\nget complacent. And look, you know, I've\nbeen there for seven years. I'm still\nchomping at the bit. I'm still looking\nat companies. I'm still meeting. I'm at\nthree today, right? just to understand\nwhat they're working on, what's\ninteresting. I go back and process my\nhead, is that going to be big? Is that\ninteresting? Is that a feature? Is that\na platform of the future? Is that going\nto be big?\nAnd it's kind of interesting. There are\nmany examples out there in even in cyber\nsecurity which people have generated,\nyou know, billions of dollars of private\nvaluations have gone back to nothing in\nsome cases. I think there's a few out\nthere, but I'm constantly evaluating\nthem, trying to analyze, will they get\nthere, will they not be able to get\nthere? And I think I have reasonably\ngood hit rate in my brain in terms of\nwhat works, what doesn't work. Just back\nto my question. I'm I'm an upandcomer.\nOh, okay. You want to go talk with the\nVP? Yes.\nUh, and I need some advice from,\nyou know, I'm a founder. I'm a little\nbit of a different animal than you, but\nI I want let's say I'm a upandcomer and\nI want to be you. Like, what what do you\ndo? Okay. You're 30. Yeah. Well, you\nhave to have product savvy. If you don't\nunderstand product in your industry or\nproduct in where you want to be, it's\ngoing to be hard in Silicon Valley,\nright? You don't need to understand\nproduct.\nYou have to be able to sell. But at the\nend of the day, even my head of product\nsells.\nYeah.\nRight. Because you're trying to solve a\ncustomer's problem. You can have great\nproduct vision. You can do a whole bunch\nof stuff. But if you're not able to\nsell, we don't need you. Right. So\nthere's a combination of being able to\nsell and being able to build product. I\nthink\nif you're any other function in a tech\ncompany, we shouldn't make you CEO,\nright? We shouldn't make the finance guy\nthe CEO. We shouldn't make the marketing\nguy the CEO or gal. We just have to make\nsure you have you're a deep technologist\nand you can go innovate your way out of\neverything and we're going to be people\ngoing to be buying us whether they like\nus or not because we have the best\ninnovation on the planet. Yeah.\nOr you're able to balance that\ninnovation with good UI as in you're a\ngood person you can sell as well. And\nthat's I think that's the magic formula.\nUm okay you brought up Larry. You've\nworked for some interesting people.\nYes.\nYou work for Larry. You work for Eric.\nYes. You work for uh\nMasa Sergey Brin.\nYep. Is what have you taken from them?\nIs there a common thread that we can\nshare?\nUh\nthe common thread is\nall of them to some degree have had high\nstandard deviation.\nOkay. What do you mean by that?\nWhat I mean by that is that they're not\nyour run-of-the-mill downthe middle\npeople. They always have some some\nthings that they're so focused and say\ngood at that they ignore the other part.\nThey're obsessive\nobsessive or they have focus on one\nthing which they can ignore the other\nthings not worry about and somebody else\ntakes care of it. Larry was very\nobsessed about product and innovation\nand like literally you talked to him\ngoing in there showing him a sales plan.\nand he wants to talk about, you know,\ntunnels that we can run on 101 to reduce\ntraffic or we were flying to Spain once\nand he literally came with the idea of\nGoogle Maps on the plane saying, \"Oh,\nyou know, how many miles of roads are\nthere in in the United States? Maybe\ninstead of trying to get ctographic maps\nand being held to ransom by e the\nmapping authorities of countries, we\njust go ride our own cars around the\nstreets. We'll cover them.\" when he was\ndoing the math, how many cars you how\nmany drivers he needed or how many\ncameras do we need to buy to go take a\nphoto copy of every book in every\nlibrary in the world.\nHow about Eric?\nEric, I think uh was spectacular for\nGoogle. I think what he did being able\nto get the best out of founders and put\nsome structure around them to Eric was\nthe best interface between two young\nfounders who had never run a company\nwith people who were used to structure\nand used to companies and he was the\nbest kind of foil interface encourager\nmentor because Eric was very true to\nwhat the founders wanted. he always\nfound a way of exposing and capturing\nand encapsulating what they wanted and\ntranslating to the rest of the\norganization. So he was amazing at I\nthink he's the one reason one of the\nmany reasons why Google went from being\nthat small sort of search white paper to\nbeing effectively what is now multi-\ntrillion dollar company. I think his\nincubating it was amazing and his\nability to sort of take himself out of\nthe equation in a self aacing way. Even\nthen he has opinions and he would find a\nway of of\nsort of couching his opinions away that\nit would feel like the founders's idea.\nSo he did a really good job I think of\ntranslating their wishes and being able\nto get what they wanted at the same\ntime.\nHave you taken a lot from him in\nPaloAlto?\nI think so. Look, we all absorb certain\nbehaviors from different people.\nSounds like you absorbed a bunch of him.\nHim, Larry, Masa.\nTell me about Masa. What' you take from\nhim? What can we all learn from Masa?\nLook, I told you we should hit\nhard and, you know, hit big in the first\nearly.\nThere's no earlier than hitting big\nevery day, right? I keep I I say that I\nsaid it before. You know, we bring up\nour kids and we teach them. We risk\nmanage our kids. You know, our kids grew\nup saying, \"Don't cross the street. Be\ncareful. look like left, look right,\ndon't jump at the pool without a flirty\nor literally constantly risk managing\nour children until they grow up and say,\n\"Oh, good. My kid's a good kid.\" He\ncomes home and does homework like me,\nyou know, and doesn't get into trouble.\nThat's risk management. Masa does not do\nthat. Masa's the opposite. Masa says,\n\"Okay, we can borrow more money. Okay,\nlet's go double down on this asset.\nDon't worry about this one. Let's go do\nthis one.\" And he's like a, you know,\nkid in a candy store. He will go bet big\nevery day. And that's kind of how he\noperates. So his risk appetite is\nfundamentally different than anybody\nelse I've met in my life.\nAnd that's kind of like he's kind of\nlike that kid who falls and stands up\nevery time takes another punch in the\nface because he knows one of these\npunches going to land not land he's\ngoing to win. My Mount Rushmore of CEOs\nare Steve Jobs,\nmy dad and Jerry Garcia. Who do you\nfollow? Do you follow like my gen I\nthink we're similar ages like Steve Jobs\nwas kind of the guy. The younger\ngeneration seems to follow Elon. Is\nthere someone is there a\nyou know I think\nis there someone now you're learning\nfrom or watching?\nIt's kind of like this this is an\ninteresting question. Uh I struggle to\nencapsulate everything I want to learn\ninto one person.\nOkay.\nAnd I think if you look at some of the\ngreat CEOs out there each of them has\nsome amazing set of attributes we can\ntry to look at and say oh my god this\nperson's crazy. I mean look at Leon like\nyou know he's the most innovative person\nin the world. Now,\nthere are certain things I wouldn't want\nto\nsort of take from him, but his ability\nto think out of the box, his ability to\nthink big, his ability to go solve a\nreally hard problem. And as he's proving\nthat, look, you solve a really hard\nproblem, you go at it for 5, seven,\neight years. You find the resources,\nyou're everybody else 8 years behind.\nNow, the question is, can you capitalize\non that, monetize that? Look at whether\nit's a car, whether it's Starlink,\nwhether it's Neuralink, whe I don't\nknow, you saw a company yesterday that\nhe's launched, which is called Macro\nhard. It's be interesting. I don't know\nquite know what it does but so his\nability to just think so far ahead and\ntry and go after meaty big problems very\nfundamentally different than half the\nfounders show up saying I've got an app\nwhich optimizes your sales flow dude how\nmany more of those do I need\nright so I think watching him think\nabout trying to be a true entrepreneur I\nthink it's bar none right you just named\nBill Mcderman and Mark Penny I think\nthey're the two best enterprise sales\nevangelists in the world I mean you can\nlearn from them because they know how to\ngo take something turn to a platform how\nwork the system, how to build go to\nmarket, how to lead their teams to\ngreatness, right? I mean, look at the\nother side. There are some amazing\nfounders. I was with Ali [ __ ] last week.\nI think he's amazing. He's doing a\nphenomenal job at data bricks. He's\nhard-nosed. He knows what he wants. He's\ngrinding it out and he's building\nsomething that's going Sam Alman. Nobody\nin their right mind\ncan imagine what he's up to, right?\nLike, two and a half years ago, he just\nlaunched at GPT. Today, we've got\nhundred billion dollar deals. I mean,\nthese are big deals by any imagination.\nlike and you do three in a row in a span\nof four weeks or 6 weeks. There's people\nout there doing big gutsy meaningful\nmeaty stuff. Some of this still remains\nto be seen where it's going to land. But\nit's just is there a common thread,\nappetite for risk.\nThey're all very different. Was when you\nwent through them like they're all very\ndifferent.\nVery different. They're all very\ndifferent. And I think uh that's the\nbeauty of\nyourself. Everyone else is taken.\nYou know, it's kind of like you're very\nright in the way you say that if you're\nnot yourself, the risk is you're going\nto do a shitty job of trying to be\nsomebody else. So, you might as well\nkeep doing a good job of being yourself.\nAnd if that works out, it's good.\nWhen I was CEO of HubSpot,\nI had this ratio of the average HubSpot\nemployee was X, and I didn't want to be\nmore than 30x off.\nWhy was I wrong about that?\n30x of what?\nThe average. So, if the average Hub\nspotter was making huh,\nyou know, 100,000 bucks, I didn't want\nto be more than 30x. You're one of the\nbest paid CEOs in history. Tell me your\nphilosophy on pay.\nWell, actually, you know, funny you\nshould, and I've never talked about this\npublicly, but I didn't set out to be\nYeah. that when I met the board of Palo\nAlto, I said, \"Listen, you pay your CEO\n20 million bucks a year. I plan to be\nhere for seven years. just give me seven\nyears worth of stock now and you can\ntake it away if I leave sooner at any\npoint in time. That's the only thing I\nsaid.\nIt was a seven-year vest.\nYeah, it was a seven-year vest. I see.\nAnd it's 20 million bucks here, which\nwhat they paid Mark.\nSo, I didn't ask for any more than what\nthey were paying Mark. I did add a\ntwist. I said, \"Listen, I don't need\nmoney. Why don't do it all in options?\"\nThey got cold feet. They gave me half in\noptions. Those half options turned out\nto,\nyou know, tremendous amount of money\nbecause of the fact the stock moved up\nsix times. I set out to be exactly what\nthey were paying somebody else relative\nto the benchmarks in the market.\nThat's how you did it. Um, you're\nadvising a CEO today.\nUh, how should they think about comp?\nLike should they be doing it like Elon?\nLike you really pay a lot for great\nperformance. You don't pay that much for\nmediocre performance. Should you be\nheavy on ISOs versus nonquals versus\nPSUs?\nuh should you have long vests, short\nvests like\nI think the you're advising a board, you\nknow,\nthe balanced approach is that you have\nto have enough on the table that the CEO\nor the employee for that matter doesn't\nfeel like they can leave and go if\nthings don't work out.\nYeah.\nYou want enough skin in the game that\neven in a reasonable scenario, I'm going\nto make a reasonable amount of money so\nI don't feel I need to go somewhere\nelse. Yeah. At the same time, there\nshould be adequate reward for hitting a\nhome run. I think that's the balance\nboards need to strike. There's lots of\nmodels out there in terms of how it's\ndone. There's a combination of RSUs and\nPSUs that people do. There are threeear\nvests people do. There are cumulative\nvests. There's stock price. So, there's\nmany different tools in the toolkit to\nmake it happen. I think that's not\nthat's not kind of where\nit actually matters.\nOkay. I think where it matters is\nand this I've seen this many times\nbecause obviously my packages are public\nand I've had many CEOs call and say how\ndo you structure this? The CEOs actually\nhave to have a conviction of what they\nbelieve the business is capable of.\nRight? Elon just didn't go ask for a\npackage. He actually said I believe I\ncan do this to the business. He actually\nachieved that and then he got in trouble\nbecause it wasn't fully done the right\nway. But he had a conviction. Many of\nthe people who have taken packages like\nElon haven't failed as well because they\ndidn't get there. So you have to have a\nvery reasonable sense of\nscenario planning. How can my business\nget there? I can tell you high power\naltar can go from now what is $140\nbillion company to half a trillion\ndollar company in 10 years if certain\nthings work out right. I have a view as\nto how to get there.\nI know the math to get there and the\nquestion can I execute to the math.\nIf you have a math you can execute to\nthe math you'll get there. But I've seen\nCEOs who say oh my math is because I'm a\nyou know thinly traded stock at 5%. I\njust went public. I think I can triple\nthe frame. But that thing can go down as\nquickly as it goes up and it's fully\n100% public. Go do the math. So I think\nmany people don't do the math of what\nthe feasible set of outcomes is and what\nthe probability associated with them is.\nOnce you do the math, understand the\nprobabilities, then you can go take\nwhatever.\nI think the thing that's broken out of\nit is like most public companies, they\nlook at your comps. Yes.\nSimilar market size companies. Then\nevery public company says we're going to\nthe comps and we're going to pay you at\nthe 75th percentile. And\nbut after five years the 70% moved up\nbecause everybody's now that's 50th\npercentile.\nAbsolutely.\nDon't tell everybody that.\nYes. Um okay, last question.\nYes, sir.\nYou've got a very in I don't know you\nwell, but my sense from talking to Jim\nand others, you have a very vibrant,\ninteresting life outside the\nspreadsheet.\nUm and I'm just going to rattle a few\nthings off that I know about and I know\nthere's a lot more. You purchased a\ncricket team.\nYes. Uh, you won the MX ProAm golf\ntournament pretty recently.\nBlind squirrel Theory finds an acorn.\nYep. Um,\nyou married what seems like an amazing\nwoman from an amazing family, had an\namazing wedding ceremony.\nYes.\nAnd it kind of goes on and on. Most of\nthe CEOs I work with are pretty obsessed\nwith work and don't really have much of\na vibrant life outside. particularly now\nlike it seems like people are kind of\nfollowing the Elon playbook and the 996\num playbook. Tell me about your life and\nhow how you think about it. Give me give\nme some advice.\nOh, look um when I turned 40,\nI invited 40 of my friends uh for my\n40th birthday. I took them away and we\nhad a great time.\nHow old are you now?\nI'm 57. It's public, so there's no harm\ntalking about it.\nI'm the same.\nOkay. So, um, and\nI had I actually spoke about every one\nof the 40 people who were there at my\n40th birthday. And I found that amazing.\nAnd I said, I hope I can do that when\nI'm 50 and I can do that when I'm 60.\nAnd it's kind of like\nyou can't do that if you don't invest in\nthem. So, I like to invest in my\nfriendships. I spend time with my\nfriends. I check on them. They check on\nme. They know I'm there for them. So,\nthat takes up a reasonable part of my\nlife. I have three amazing kids. Uh\nmaking sure they get my attention. My\nwife\nI met one of your kids at the airport.\nYes, you did. You did. Yes, you did. And\nI have two others. Uh you have met, but\nall three of them are amazing and I want\nto be able to spend time with them. I\nalso promise myself I try I try I can't\nsay I'm 100% on this. I try not to do\ndinners. I don't do work dinners. Oh,\nwhich is hard because a lot of people\nwant to do work dinners. But in a\nsitting and talking business after\nhaving worked the whole day is not my\ncup of tea. Now once in a while I get\nyou have to do them. I was last night I\nwent and spoke to 12 CEOs who were at my\nwife's restaurant. So I had to go do\nthat but I asked her to come join me\nafterwards at dinner with her. So I\nwould always try and find a way and by\nthe way this is not just there at Google\nI it was a rule and if you work to\nGoogle in marketing every event for\ncustomers would have to have with\nspouses so I could bring my spouse to\ndinner.\nOkay. So, I find a way of making sure\nI'm not without my family at dinners. I\ntry to do that. I kind of have a rule\nthat I try not to work weekends.\nOkay.\nWhich is hard, which I still do about 2\nthree hours a weekend, but I I I want to\nwork my 60 hours between\n7 is that is it about 60 hours you\nfigure you work?\nI think so. I think so. Now, my wife\nwill tell you that probably my brain\nworks way longer than that, 60 hours.\nAnd you know she always sort of\nquestions me why did I join two\ndifferent boards in addition to Palo\nAlto I'm on the board of Uber and\nRishamont but you know it keeps me\nintellectually honest I see other\nbusiness.\nWhat's your day like? So what was tell\nme about today?\nWhat time did you get up?\nI woke up at 5:30.\nWhy?\nI go to the gym at 6. I watch CNBC for a\nlittle bit.\nOkay.\nI unwind. I\nCNBC is doesn't unwind me.\nWell I watch it to see what's going on\nin the world so I can kind of keep track\nof what's going on. I usually go to the\ngym. I'll go invert myself for five or\nsix minutes. I'll do a little bit of\nweights. I'll do a little bit of\nstretching. I go to the get myself\nstretched, etc. Work my way back to my\nkids at 7:00. They wake up at around\nseven. They're young and chat with them\na little bit.\nYeah.\nThen I came to work at 8:30.\nOkay.\nAnd I talk to three different customers.\nI talked to two startups. I\nIn the day, is it you booked every half\nhour? You have big openings. You have\ntime to think. Do you\nI usually am booked every half hour.\nSometimes it's an hour. I usually have a\nhalf an hour gap here or there to just\nyou get exhausted during the day ever or\nyou just up.\nNo, I can power through the days pretty.\nLook, my superpower is uh context\nswitching and being able to focus.\nI think that's a key thing.\nYes.\nYeah.\nI'm the best consumer of slides or\nPowerPoint than you can find. I can\nOkay. I can absorb 20 in under a minute\nand tell you what the problem is.\nOh, that's a pattern recognition.\nThat's a superpower.\nIt's pattern recognition. Yes. Um, lots\nof inputs coming into you like millions\nof freaking emails and Slacks and texts\nand phone calls and requests for your\ntime. How do you manage the just the\nhurricane of chaos? Good news is unless\nit's a customer email,\nyou can ignore it.\nOkay. Unless somebody really needs\nsomething for you, you can ignore most\nof them. Half the inbox is full of junk.\nYeah.\nUm, probably 10 20% is people telling me\nwhat's going on. and I'll read through\nthem and I kind of get the gist of it.\nIf it's a customer will not respond.\nI did learn a trick which I do in my\npersonal inbox because my personal email\nis a lot less,\nyou know, noise in them. Every time I've\naction an email or I don't need it, I\nwill either archive it or delete it or\nfile it.\nOkay.\nSo, my personal inbox is always less\nthan 100 emails.\nYour inbox zeroish?\n100 emails is pretty good. And usually\nI'll go review it once in a while and\nsome of them will go in. and I'll action\nthem because that I keep pretty\nwell managed and the work one I do it\nright then if I don't right then there's\na risk that it slips\nwhat advice do you have to the founders\nwho are really committed to 996 and\ntheir teams on 96\nwhat is 996\n996 is uh they but they require of\nthemselves\nlike a new Porsche or something\nno no it's they they require everyone to\nwork 9 a.m. to 9:00 p.m. six days a week\nin the in the office.\nThat's kind of in fashion with the\nstartups now and it's most of them.\nYeah. I I think there is tremendous\namounts of impatience out there because\npeople somehow believe that every minute\nthat they're not trying to further their\nobjective. They're going to not win. And\nI think that's a fallacy.\nI think some amazing businesses have\nbeen built because their idea was so\ndifferent. I don't think people have\noutco competed Starlink even if they\nweren't working nice even though Elon\ndoes for the most part because he's\ntrying to get somewhere. He's got six\ndifferent companies to manage. But I\njust think working smarter might be\nbetter in balance\nthan working hard. You run the risk of\nburning out. You run the risk of burning\npeople out.\nYeah.\nI I I don't see the value of 99.\nI appreciate you coming on the pod.\nYou're kind of the Renaissance CEO. Uh I\njust came back from Florence and you're\nkind of a Renaissance man CEO. So, I\nappreciate you coming on.\nThanks for having me. I appreciate it.\nThank you very much.\nOkay, hopefully you like that episode\nwith Nikesh. He's terrific. You probably\nnoticed we talked a lot about M A. It\nwas a little self- serving because\nHubSpot's done a bunch of M A and I\nwanted to learn from him. He's done a\nton of it and it's largely worked. But\nwhat I wanted to do for you guys is to\nkind of turn it around and and use what\nhe said as like what would I do as a\nfounder thinking about selling my\ncompany or getting interest in selling\nmy company? How might I think about\nthat? And how might I negotiate with\nsomeone for example like Nesh? Now first\nthere are several reasons you might\nconsider selling. Um one is if you've\ngot a big platform player like Palo Alto\nor Salesforce or whoever it would be and\nthey come knocking and you pass on them,\nthere's a decent chance they buy your\ncompetitor. And if they don't do that,\nthere's a decent chance they build it\nthemselves. It's going to take him a\nwhile, but that big platform player\ncould be hard to deal with down the\nroad. And you know, one of my things is\neither either you become a platform or\nyou get eaten by a platform. And that\ncould easily happen to you. And so don't\nunderestimate that. The other thing he\nsaid on the call that was interesting is\nif a sales rep selling his product and\nit's a platform, there's 10 different\nproducts on top of that platform, that\n11th product, yours,\nPaloAlto doesn't need to be out innovate\nyou. It doesn't need to be beyond you in\nterms of features and functions. It\nneeds to be a table stakes and the buyer\nwill want to continue to buy from that\nplatform vendor. And so don't\nunderestimate if you pass on it the\ntrouble that could come down the road.\nUm the second obvious reason is you make\na ton of money, sell the company. Um and\nif you're young, you can put that money\nto work and start another company. Um\nI'm old. Uh and the third really nice\nthing about selling your company is you\nget massive distribution for your\ninvention. You invented this amazing\nthing. You're working on distribution.\nYou're probably not enjoying that and\nyou can get huge distribution from the\nplatform better. And that certainly\nhappens with Palo Alto. So those are\nkind of the reasons to do it. So let's\nsay you're thinking about doing it. I\nthink a mistake a lot of founders make\nis they overthink the headline number\nlike we got bought for five billion\nwhatever the number is. And if you look\nat it from Nikesh's side, there's other\nthings you can negotiate other than the\nheadline price. So let's dig into if I\nwere negotiating with somebody to get\nacquired, some of the things I might\nwant to do. First thing he said that was\ninteresting is typically when they buy a\nco-founding team, one wants to stick\naround and the other doesn't. And I\nfound kind of the same thing when we\nacquire companies inside of HubSpot. So\nmaybe one thing you negotiate is there's\none comp plan for you if you want to\nstick around or one comp plan for your\nfor your co-founder or one vesting\nschedule for that one that wants to get\nout. No matter where you are on that, I\nthink you want different terms. Um that\nmight be one you want to work on. The\nother thing he said that's kind of\ninteresting is when he buys a company,\nhe typically rolls back some of your\nshares and gives you a three-year vest\non them, which is a little harsh, but\neveryone kind of does it. But what he\nsaid on top of that was he typically\nsticks a bunch of new options on top of\nyou from PaloAlto Network up to 30%. So\nthat's definitely something you can\nnegotiate. He also said it's very hard\nto give massive grants to somebody\nduring the normal board cycle. This is\nthe time he can kind of get away with\nit. So, you might think about that if\nyou're getting acquired. Um, you also\nwant to think about the position. Like\nmost companies when they acquire you,\nyou get knocked a few levels down in\nthat ORC chart. I like the way he\nthought about it. Like, hey, we were\ntrying to get into the space. You guys\nwere crushing us. We're going to put you\nyou on top of our team. You might try to\nnegotiate that. Um, I think would be a\nvery nice thing to do. And the last\nthing you said that was brilliant that\nthat I want to start doing at HubSpot is\nduring the diligence process, you\nbasically envision what the road map\nwill look together so there's no big\nsurprises, but during that you might\ncome up with some really good ideas that\nmake you more excited about it. Those\nare some of the tricks. So the headline\nnumber is important. It's good for your\nego, but there's a bunch of other\nimportant things that you want to\nnegotiate when you're going through the\ndue diligence with someone. Okay. One of\nthe things I really like about Manesh is\nis he's he unlike I was, he's very\nfocused on work life balance. He works\nMonday through Friday. Um, he tries to\nwork 60 hours a week and he doesn't do\nbusiness dinners. I think that's a\npretty good hack. I I do a lot of\nbusiness dinners that I could I don't\nneed to. I wonder for myself and I\nwonder for you if you took Nikesha's\napproach like would your company split\nin two and fall apart or maybe would the\ncompany be better off? Would you give a\nlittle room for your brain away from the\ncompany and the day-to-day tactics to\nreally think and concentrate? He talked\na little bit about luck and I feel like\nI've been very lucky and I want to wish\nyou the best of luck on your CEO journey\nand I'll see you on the next edition of\nthe long strange trip.",
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