Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And a little while back, I got an email from a guy named Aaron who said, “Hey, you at Mixergy should know about the CEO of my company. His name is Joel Trammell and he’d make a great guest. He launched a few companies including Khorus, which is the most recent company.
It helps executives and CEOs drive more predictable execution at their company. You should talk to him about that. You might want to talk to him about also NetQoS, which is the company that he founded that was a developer of network and application performance management software which he sold to CA Technologies. Or you could talk to him about how he cofounded CacheIQ which we sold to NetApp.”
Basically, there’s a lot in here. “And since this note, he has become the CEO of a publicly traded company called Black Box.” I’m going to read right off of Black Box’s About section. But I don’t think that that’s going to give us enough clarity about what Black Box does. It’s a leading digital solutions provider dedicated to helping customers design, build, manage, and secure their IT infrastructure. Not bad, but we’re going to find out a little more about that, about what he’s been doing over the years. My focus for this interview is going to be about NetQoS.
And this whole interview is sponsored by two great companies. The first will do your finances right. They’ll get your bookkeeping in order. It’s called Bench. And the second will help you hire your next great developer. It’s Toptal, “Top” as in top of your head, “Tal” as in talent. Joel, welcome.
Joel: Glad to be here.
Andrew: Would you have done this interview if you knew you were going to be the CEO of a publicly traded company? Or would you have said, “Hey, no, I can’t do that?”
Joel: Well, maybe I might have passed on it if I had known that was going to happen, but that came up kind of suddenly.
Andrew: I appreciate that you’d still be here. Why did you decide to be a CEO of another company when you had recently launched a business course?
Joel: Yeah. So, I’ve spent the last . . .
Andrew: I shouldn’t say recent. It’s been four, five years at this point, but still.
Joel: It’s four years. Yeah. But I’ve spent most of time the last half dozen years teaching the role of the CEO, riding on the role of the CEO, and I’ve been on the board of Black Box and the company. I thought I could use my skill set to turn around their organization and they help our 3,300 employees.
Andrew: And Khorus is a company that you’re still a part of. You’re the chairman. You told me you hired a CEO who is going to start soon.
Joel: That’s right.
Andrew: All right. Let’s go back and talk about this business that you launched and you sold. You launched it with your wife, NetQoS.
Joel: That’s right. She was the brains of the operation. She’s a 4.0 Ph.D. in electrical engineering from the University of Texas. And she had done a bunch of work with a company called Schlumberger around network management software. And they decided they were leaving Austin and we wanted to stay in Austin, and so I convinced her to work with me to start a business.
Andrew: And so the need first was, “We need to start so that we can stay in Austin,” and then the idea came out.
Joel: Yeah. The idea was based on work she had done at the time. Companies were just starting to have large scale networks that they had to figure out how to manage those networks, how to make applications to perform across the wide area network. That was not a well understood concept at the time. And so there was a lot of opportunity.
Andrew: You know what? I’m looking at her profile on the University of Texas website where she’s teaching. I’m in awe of what she knows and intimated, to be honest with you, when . . . maybe you can help me understand the vision that you guys had with an example. Is there a use case that you can share with me that can illustrate what your vision was for the business?
Joel: Sure. At the time, you know, networks were fairly new. This goes back to late ’90s, early 2000. And most networks were managed from an up down perspective. All the network engineers really cared about were, “Are we passing package back and forth?” But that’s like saying there’s a road open. The road can be open, but it may take you two hours to get to work.
And so what companies were beginning to do was run applications across the network and understand the various applications required different performance characteristics of the network. And so, they wanted when a user clicked on an app in Abu Dhabi to get similar responses as if they were sitting where the data center was in Houston and start understanding how do you manage the network from a performance perspective, not just an up down availability perspective.
Andrew: This is 2009 when you started the business?
Joel: This is 2000.
Andrew: 2000. Oh, we copied the wrong date off of your LinkedIn profile I guess.
Joel: Yeah, 2009 when we sold the business.
Andrew: Got it. Okay, so when you talk about a network manager, what’s a type of company that would have been a client?
Joel: Yeah. Any company that has a lot of locations. So, typically, it was the bigger the better. By 2009, we had 17 of the Fortune 25 as customers. So any company that had a lot sites, needed all those sites connected by their network. And typically, if especially if it was international, they spent a lot of money buying bandwidth from various phone carriers around the world.
Andrew: I see the press release and articles from the sell. Is this right what Network World said that it was bought for $200 million?
Joel: That is correct.
Andrew: Wow. And you raised how much for it?
Joel: We raised $13 million.
Andrew: Wow, impressive. How about this, I’m looking here at notes and it says that you were listed as the GM at the company, not the CEO. The one place I think where you weren’t a managing, partner, or CEO.
Joel: I was CEO of NetQoS when we were acquired by CA. They gave me the GM title.
Andrew: And that got stuck in the notes.
Joel: Yeah. And even though I was just like [inaudible 00:06:03] on Silicon Valley. They never gave me an actual job to do. I just sat around and collected a paycheck for six months before I went crazy and decided that I had to do something else.
Andrew: And that’s where you ended up at CacheIQ?
Joel: That’s correct. Yeah.
Andrew: So you were as a CEO the person responsible for getting customers?
Joel: I handled . . . you know, my wife was the technical expert. So she was this chief technology officer and kind of handled the technical side of the business, and then everything else kind of fell in my lap. So certainly sales and marketing were a piece of that, and, you know, that was certainly in the early days the biggest piece of the job.
Andrew: I’m wondering what your background is, and I mean way background? Growing up, what were you like?
Joel: My dad was an engineering professor, and so I grew up being pretty good in math and he actually wanted me to get a Ph.D. in engineering. And when I graduated in college, I took a job teaching at what’s called the U.S. Navy Nuclear Power School teaching science and technology. And started working on a master’s in engineering and took a couple of graduate math courses and just decided I didn’t have any interest of kind of theoretical engineering anymore that I was really interested in business.
And so, at that time business schools didn’t want to just let you start an MBA program. They wanted you to go back and take 60 hours of undergraduate business before they’d let you in their program. And as an arrogant engineer, I wasn’t going to waste 60 hours of schoolwork. And I said, “Well, if I can’t get an MBA, I’ll just start my first business.” And pretty quickly you become unqualified to do anything else, so you better figure out a way to make it work.
Andrew: Do you remember the neighbor you had with the Porsche?
Joel: I do. Yes.
Andrew: What was this neighbor doing that earned him a Porsche?
Joel: Yeah. So, you know, my next-door neighbor was a year younger than me and so we hung out together and stuff and he had this job where he sold fireworks on 4th of July and Christmas. And so, he told me about all the money he was making selling fireworks running the stand for a guy. And I said, “Well, you know, that sounds interesting. You know, can I get a job doing that?” And I’m 15, 16 years old, so it’s kind of my first job.
And so he said, “Sure. I’ll have the guy come by your house, you know, one day when he’s here and see if he likes you and see if you can get a job.” And so, the gentleman drives up and he drives up in a Porsche, and this is, you know, early 1980s. It’s Ruston, Louisiana, a small kind of podunk southern town. We didn’t see Porsches. You know, if you saw a Porsche driving around, that was a big event.
And the more I visited with this guy, the more interesting he became because his day job was teaching elementary school PE in a small other small town down the road, you know? And I’m like, “Wait a minute, I know what an elementary school teacher makes. They can’t afford a Porsche. So how can this guy be driving around in this car?” And so that started my interest.
He liked me. He hired me to run one of the stands. We talked a lot about business. Talked a lot about entrepreneurship. He was the first person that I would ever . . . you know, in those days we didn’t use the word entrepreneur, we just called it a small business person. But he was the classic hustler. And so that was where I got the first taste that you can run a business and that you can make money kind of with your wits, and you can be in control of your own destiny. You didn’t have to work for somebody else. These were all kind of new ideas to somebody who had grown up with a university professor as a dad.
Andrew: What kind of hustling did you do as a salesperson at the fireworks stand? Did you learn how to sell? Did you learn something from him that you were able to apply back then?
Joel: I learned . . . he was an interesting character. If you met, he had an even thicker southern accent than I do. And so often people assumed maybe he was a little slow and he wasn’t at all. And so, I tell a story in the book, one of the first days I’m working at the fireworks stand, a gentleman walks in and starts ordering fireworks. And what that meant, was that there was a board on the wall that would have prices. And so, the guy says, “I want one of this, two of this, three of this,” and we didn’t have a calculator or a computer or anything. So, he just had a brown paper bag that he wrote everything down on, and he added it all up. And as he gets about halfway through, the guy says, “Well, I’m buying so much from you. You ought to give me a discount.”
And Ronnie was the guy’s name, and Ronnie says, “Absolutely, sir. Nor problem.” He gets to the end. He adds everything up. It’s $44.00. He says, “I’ll give you 10% off, make it an even 40.” The customer left with a smile. Since the customer walks out the door, I said, “Ronny, you made a mistake.” I said, “That added up . . . you counted one thing too many. It really should have been $40 to start with.” And he smiles and he said, “I’ve been doing that for 20 years. You’re the first person who ever caught me.” And so we bonded a little bit, that I was at least sharp enough to catch on to what he was doing.
Andrew: So then when you started selling at your own business, how did you do it? How much of that energy did you bring into your sales?
Joel: You know, for many sales I’m a relationship person. You know, and so I want you to buy from me because you trust me and believe I’m looking out for your own best interest. I’m not a whiz-bang high energy guy that convinces you, you know, the guy that can sell ice to Eskimos. I have to really believe in what I’m selling and that’s why I think I leaned towards entrepreneurship or you’re creating what you’re selling. I would have a hard time going to sell, you know, somebody else’s product.
Andrew: So how were you able to get credibility when you’re starting a new business to get people to trust that you can actually help them?
Joel: Yeah. That’s a big and difficult concept. I talk in my book about, you know, there’s really three things to get people to follow you. They have to believe you’re credible, that what you say is true. They have to believe that you’re competent, that you know what you’re doing. And then the third piece that a lot of especially technology people miss out on, is they have to believe you care about them. And that’s something that a lot of . . . you know, I talk to a lot of entrepreneurs, young CEOs, and they may care very deeply.
But I tell them, you know, “If you sit in your office all day and program and have pizza thrown under the door, it’s hard for people to understand that you really care.” And so that human piece of building a relationship, I love it. There’s a John Maxwell quote that, “People don’t care how much you know until they know how much you care.” And I think that’s very true and something that’s often missed in technology.
Andrew: The book that you’re referring to is the “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO.” So, you’re saying that you, having them know that you care, helped you close sales. Can you be more specific about the process? How did you find the customer? How did you convince them that you care, that you’re credible, that you can actually deliver? Was it that you’re competent?
Joel: Yes. So, you know, you have to be interested in the customer, be interested in what problems they have, show that you understand those problems and that you’re not trying to put a round peg in a square hole, that you’re really solving based upon what they tell you around their particular issues. And so, you know, one of the things NetQoS that I remember a couple of times when I was with my sales team and a customer would say, “Oh, sorry, we can’t meet right now. It’s going to be 15 minutes or 30 minutes. We have some network issue going on.” And those sales almost always closed because immediately we could show them how we could have helped solved their problem with our product. And so, you know, making it personal . . .
Andrew: So, if someone says, “Sorry, I can’t meet because I’ve got this problem going,” that’s a boon for you.
Joel: That was a boon for us. Yeah, absolutely. Because we had ways, typically, to help them solve the problem and showing them, we understood some of the issues that they were dealing with.
Andrew: What was the first product like? The first when you were starting to build this out.
Joel: Yeah. So the first product actually collected data from network devices and told what traffic was going on on the network. And so I remember going in very early at that time one of the big five accounting firms and asking them, “Hey, do you know what the number one source of traffic is on your network?” And at the time, there were a Lotus Notes shop. And so they said, “Well, Lotus Notes, you know, should be our most traffic on the network.”
We said, “You’re right, Lotus Notes is number one. Do you know what number two is on your network?” And they, you know, named off a bunch of particular applications and we said, “Sorry, but your number two application on your whole global network is Napster and people sharing music files.” And so that was a huge enlightening moment for them.
Andrew: And then once you told them that, what could they do that? Were you helping them shut that down?
Joel: Absolutely. So they were advertising and those days, you know, Napster the way it worked was it advertised your bandwidth that’s available. And so, they had big pipes in their network because they were a large company and so people from all over the world were coming into their network and downloading Napster, which was a pretty easy fix once we were able to . . .
Andrew: Because they could do at their home computers where they had slow internet, dial-up, if not dial-up then still something slow.
Joel: Exactly, yeah.
Andrew: Okay. And so, you said, “I’m telling you this and we can solve this problem for you right now.”
Andrew: And you were able to shut that down. That was a pretty straightforward solution.
Joel: Yeah, yeah.
Andrew: I’m looking at an early version of the website right now. It was netquos.com. The premier networking solution for optimizing the performance of the most demanding mission critical networks. You went right for the most important part of your customer’s infrastructure.
Joel: Yeah. The bigger the better for us because we had access to information that nobody else really understood how to collect and particularly collect at scale. These were very large networks. So they generated a lot of data, but we had a lot of expertise in how to handle large data sets at the time.
Andrew: It seems like a large part of your credibility at the time came from the fact that you worked for AMD. Am I right? Where you were responsible for spending there, for buying computers. Am right or am I reading too much into it?
Joel: Well, what AMD gave me, it was kind of the one real job I had outside the U.S Navy. I spent 19 months there and I managed most of their IT vendors. And what it really did for me was let me see how a large IT group does purchasing and understanding all the hoops you have to jump through when you’re dealing with a large company, how purchasing managers think different than IT people think. All of that was critically valuable when we started our own business, because I could look at it from their side, from a packaging perspective, from a pricing perspective, and understand how they would want to buy.
Andrew: How would you package it for them? For someone who has to make the buying decision but who doesn’t get the upside or the downside of a decision.
Joel: Yeah. You have to understand it’s not their money. And so what they want to avoid happening is they spend money and then they look dumb, right? The product either doesn’t function the way they expected it to, it doesn’t solve the problems they want it to solve. So too many people if they get resistance in a transaction want to drop price. But in a large company, price is really not the most . . .
Andrew: Right. Because if they save money it’s not going to mean that they’re going to get a bonus. I get it. Right. They’re not keeping that cash.
Joel: So everything you need to do in selling to that customer is around making them look like a hero, how are you going to give them some quick wins to show that this purchase they made really returned value to the organization. And so naturally people want to drop price, drop price. Now you want to minimize risk when you’re selling to a large company.
Andrew: What else did you know that allowed you to close sales?
Joel: Well, there are often maybe 10 people in a large organization like that. Anyone of which can say no, but no one individual can say yes. And so, you know, it’s a process. No matter how good . . .
Andrew: Just keeping working each individual and understand that every one of them is a decision maker.
Joel: That’s right. They can all say no. If one of them blocks you off then that’s the end of the game for you. And so, you’ve got to build a consistent process to manage that.
Andrew: You know what? I’m looking at your website from December 2000, and I’ve got to ask a question about this. But I just looked also at the time and I realized I should do a quick sponsor message. Let me talk about my sponsor and then come back and ask you about this thing that I noticed about your website. Do you ever go back in time and look at your old site?
Joel: I have not. I’ll have to do it now.
Andrew: Every once in a while I do it. But some of my companies that I had over the years ended up getting bought by other people who then do a robot’s block, so I can’t see it. So, at one point I owned grab.com, we did $1 billion jackpot on there. And now grab.com is like an Uber in Asia. They’re not looking to promote what they used to do on the site or what I used to do on the site.
Andrew: It’s fun. I kind of wish I could share my screen with you and just say, “Look at this. This is where you were back then. Look at how you guys were described back then.” All right. But first, my sponsor. Here is my first sponsor of the interview. It’s a company called Bench. We have been talking about Bench a lot. Do you know Bench?
Joel: I do not.
Andrew: This is a company that said, you know what? The bookkeeping software for small to medium businesses is just . . . it’s outdated. It doesn’t have any of the modern technology that we need to sack in data from all the apps that people use, like PayPal, like Stripe, like all the other processors that people have for credit cards. It doesn’t have any understanding of how to pull in data properly from banks. It doesn’t have any understanding of how to organize that data automagically for people. And, frankly, even if it got it all perfect, software is not perfect. It’s not the right solution for everyone.
And they said, “You know what we’re going to do is also add humans to it so you don’t have to go out and hire a separate bookkeeper and pay for this software. We’re going to do all in one. Software is going to do the majority of the heavy lifting. It’s going to do all the busywork, all the automation, but the human being is going to make sure that it works perfectly.” And that’s what they created.
And anyone out there who wants their books handled right owes it to themselves to check this out. Even if you have a software that you think is okay, pay attention to all the little things that bother you about it. You don’t have to deal with it. There is new software out there. I know most people would not switch from one accounting software to another month to month. But if you’re a small to medium size business, you can do it.
In fact, they’re going to offer you a free trial. All you have to do is go the special URL where not only will you get a free trial to actually try them out and see how well they’re going to manage the books, but they’re going to give you 20% off of your first six months Here it is, bench.co/mixergy. Dot-co is a cool domain now, not dot-com.
Andrew: It really is. I interviewed the guy who put it on the map and he basically said, “I knew who the influencers were. If I could get a handful of those, then I could avoid being the dot-net of the world where people don’t really use their domain or the dot-info and he did. All right, bench.co/mixergy.
So here is what I see on your site. If I could find that . . . oh, there it is. Under the products page, there is a lot of products. There is NQ Server, NQ Reporter, NQ Adviser, large WAN . . . well, that’s large WANs are security, large wide area networks are specialty, excuse me. Is this a lot of products for a new company?
Joel: Well, we started out and we weren’t sure what we needed to be. Did we need to be a pure products company or did we need to marry a service with it? Because what we were doing was fairly novel and so we were concerned the network engineers wouldn’t actually know what to do even if we gave them the data, that was half of it. But we thought maybe we needed a service. And so, we were pitching both product and service. We ended up selling 99% product with a little bit of service, but at that point in time, at the beginning, we weren’t sure if we were a services company with a product, or a product company with services.
Andrew: Sorry. So this is one product with multiple services?
Joel: Yes, at the beginning, yeah.
Andrew: I see. Okay, to me it felt like, “Wow, they’re building out a whole lot of different things.” Did doing the services yourself help you get customers or help you learn more about what the software should do?
Joel: It absolutely helped. It helps you develop a software and, you know, see it in live action. I mean, one of the challenges we had was it was very hard to stimulate these large networks in a lab especially with a startup budget, right? And so, we needed some experience working on live networks and large companies to make sure that everything was going to work the way we thought it was.
Andrew: Do you remember your first customer?
Joel: Well, the first customer was Schlumberger, which was where my wife had worked. And then kind of the first real customers, I’m not sure what the order it was, but I know Compaq, Texas Utilities, JCPenney, Accenture, were all big first early customers.
Andrew: I noticed that a lot in enterprise interviews that the first customers is often the person you used to work for before.
Andrew: Because they know you. They basically say, “You’ve done this work for me. We’re going to hire you to continue to do it in this new way now that you’re doing.”
Joel: Absolutely. And having a lighthouse customer like Schlumberger was unbelievably valuable because they had a great reputation.
Andrew: This is the oil field company?
Joel: Yeah. Global oil field services company.
Andrew: And so was the work that you did for them when you guys were running your own business similar to what you did for them before?
Joel: Yes. Yes. Very similar.
Andrew: So it’s basically you had an employee who did all this work, now you’re going to have a company that does this work, and we’re going to keep improving.
Joel: That’s right.
Andrew: And we need to tell people that you’re our first customer.
Andrew: Okay. All right. And then you kept on growing. What was the next . . . well, actually how did you get customers? Was it largely networking with people, going out and talking to them? Was it these whitepapers that I saw over the years that you guys published? What was it?
Joel: Yeah. I mean, we knew at most large companies, it’s pretty easy to find the guy who is the network manager who is responsible for the performance of the network and the cost associated with the network. And so, you know, you had a place to start in most large companies, and it was very much in direct sales model and you had to go visit with.
And often it was what we call the four-legged sales call. You had a salesperson and a sales engineer who was kind of the more technical resource there. You know, and in many times the customers would tell you, “Oh, ours is the largest network, or ours is unique in this way.” And of course, most of them were all the same. They were all using Cisco equipment. They were all kind of very similar. But everybody thought they had the biggest baddest network, and so you always had to kind of overcome that.
Andrew: Because they put it together themselves and so they were proud it, and this is their dream that they put together.
Joel: That’s right.
Andrew: What was hiring like to bring people in? Enterprise sales is tough. How did you bring the right people in? What was your process?
Joel: Yeah. So it took us a while to figure it out. So, in the early days, my wife would go out and do a lot of the sales calls kind of as the technical expert and would have pretty good success. And I remember kind of a knockdown drag-out with my sales leader we got into at one point. He’s like, you know, he couldn’t figure out the formula and I basically said, “Well, you know, when Kathy goes out, she sells it. What’s the problem here?” And he made some off-hand comment. You know, “I can’t hire Ph.D.’s just to go sell this stuff.” And I said, “Well, they’d be probably be cheaper than sales people.” And he didn’t appreciate that comment.
But anyway, we’ve kind of over time figured out that we needed people. That the most successful people were us, were actually people who had sat in the seat of the customer. So the sales guy who really broke things open for us, we had actually recruited not to be a salesperson, but to help us in the network engineering services side of the business. But when we got him we realized, no, he’d be a lot better actually as a salesperson, because he understood the pain the customer had been in. So he had walked into a customer and said, “Hey, I’ve been in your spot. Let me tell you, here are the problems you are having and here is how I can make your life better.” And they would really respond to that.
Andrew: You know what? I hadn’t heard much of that. Often what I hear at an enterprise is, “We found someone who talked to our customers and sold a different product or a similar product. We hired him and told them go back to your same collection of customer and do this.”
Joel: I mean, that can work. But for a startup, when you’re trying to break the sales code, often to me it’s somebody who has been in the customer’s shoes and really understands the problem.
Andrew: So you’ve got about 10 years of management experience before this, but this was your first CEO role, right?
Joel: Yeah. First real CEO role.
Andrew: How did you learn how to do this? How did you learn how to lead this business?
Joel: Well, I’m a learner. I read a lot. I had ideas. I had started my own businesses. They were small, but I had kind of developed some at least concepts around running businesses.
Andrew: This was HomeSmart, for example, that was one of the businesses?
Andrew: What was HomeSmart?
Joel: It was a small software company. It was software for home builders, and this is way back to when digital cameras and color printers first kind of came on the scene, giving them away to sell and market their homes to buyers that was a little more sophisticated in what they were doing at that time.
Andrew: Online sales?
Joel: Yes, to do it online.
Andrew: So you’re helping them . . .
Joel: Sales and marketing. Well, you know, so you would have a builder who would have 20 different models they built and they might have 10 or 15 sites around the city where they were building. And you would come in and they would typically just have pictures on the wall. But they would have built the exact house you were looking at somewhere. And so we captured all their existing homes and let them show real, you know, actual color pictures and color images. And you could do things like change the roof and do some simple things like that to make it more attractive.
Andrew: You know what? Today that’s pretty common. I’ve been looking to buy a house or . . . I guess a house and then I thought, maybe an apartment here in San Francisco. I don’t know. And I looked at this one, it looked gorgeous. And then it wasn’t until I looked at the fine print on Zillow that I realized, “Wait a minute, this an artist rendering of what the place would look like.” But they’ve got it looking so real that I feel like I could see it.
Andrew: I had no idea. So this is where you did it. So what did you pick up with that experience that allowed you . . . what did you learn about leading from there?
Joel: Yeah. So one thing I learned that I tell people all the time is in technology it’s pretty easy to predict the future. It’s very hard to get the timing right. We were about 15 years ahead of the market, and now it’s pretty common to see systems like this. But at that time, most of the home builders were driving around in pickup trucks with Big Chief tablets next to him. And so, they weren’t looking for a technology solution.
So we sold it to one big home builder, but that was it. And so, any time, I think, you know, technology, you got to get the timing right, and that’s really hard to do. And every business I’ve had, you never know, or even with Khorus, we’ve wondered are we too far ahead of the market. You’ve got to wait until the market catches up. That’s a constant challenge in leading the technology business.
Andrew: What else did you learn about how to manage people, how to recruit people? I know that those are topics that you’ve talked about in your book too.
Joel: Absolutely. You know, I left college as kind of the standard engineer who would have told you people don’t matter, it’s all in the numbers. It’s all in being the smartest guy in the room.
Andrew: And you are the guy who put together the software that you described a moment ago, right?
Joel: Right. And so, you know, 30 years later, I would tell you it’s all about people. Every person is unique. I’m a big believer that almost everyone is capable of being great at something, and management’s job is trying to get them into a role of where they can be great at what you need them to do. And that’s a challenge.
Andrew: I saw that. We asked you in a pre-interview what book would you recommend? It was “Discover Your Strengths” by the . . . what he’s name?
Joel: Marcus Mack Buckingham.
Andrew: Marcus Buckingham. Really well written book. And I think now he works at Facebook helping them implement all these techniques.
Joel: Yeah. He started his own company and then that got sold, and he’s done a lot of consulting and speaking. He was really a thought leader in this area of managing people’s strengths as opposed to the typical approach, which is tell people how they’re bad at things and that they need to improve.
Andrew: And it seems so counterintuitive when it first came out, but it was a well written book with enough material to support it but also enough to make me aware of myself. And I realized, “Wait a minute, I actually do perform better when I employ my strengths instead of trying to smooth out the rough parts.”
Joel: Yeah, absolutely. That’s a key management concept that I use every day.
Andrew: And so that’s one thing. You know what? Why don’t we take a step back and just talk about recruiting and hiring? How do you bring people in? Because it all starts with that.
Joel: Yeah. So, you know, I’ve been fortunate, I guess, in some ways. I did 252 interviews to hire 100 people in one year.
Andrew: Two hundred and fifty-two to hire a 100 people, doesn’t sound like that much.
Joel: No, but doing 252 interviews in one year is a lot of interviews as being CEO of a company. And so, you learn a lot in doing 252 interviews, first of all. You learn that what’s important is talent not knowledge. Most managers hire for knowledge.
They have a checklist of things that they want somebody to know so they can hit the ground running and they don’t have to spend much time with them, and that’s a terrible way to hire because you have a position available because you just fired somebody who the exact knowledge that you would have written down on the piece of paper. They knew the software you were using if they were a developer. They knew the code, whatever. But they weren’t a good performer.
And so what’s very critical in recruiting is understanding knowledge is the last thing. Knowledge can be gained. Talent and strengths in the area that you need them or what you’re looking for and how do you identify those things are what it’s important.
Andrew: How do you identify that? And then what do you think the role . . . I’ll come back and ask the second question. How do you identify that, whether someone has the talent to do the work?
Joel: Yeah. So, if people are talented in an area, it means that they get energy from doing it. So, you’ll find they do it often, even if they’re not getting paid. So, in the old days, particularly if you were interviewing a developer, I would ask him about what projects they worked on outside of work. Because any really good developer had some project going on, on the side where they were building something, right? And they had a history of being good at doing development. They had won some coding contest in college or they had done something . . . you don’t just wake up and you’re Michael Jordan.
You know, Michael Jordan was a really good high school player, good enough to go to North Carolina to play basketball and makes the game winning shot in the NCAAs. There was a lot of history there. He didn’t just show up in the NBA and suddenly become a great performer, right? It’s the same thing with work. People have a history and you should see that progression when you look at their resume, when you talk to them, you should hear all the things, and it should be building towards something.
Andrew: You know what’s funny? When I see that, I sometimes feel that maybe it’s a distraction. Today you can see people’s side projects online because it’s all public. You can see what they’ve done. And if you see someone who has lots of side projects, there is this feeling that they’re going to be distracted by constantly doing side projects, or they’re going to take one of the projects and run with it. But you’re saying . . . I guess you’re not talking about an extreme where all they have is side projects. But if you’re saying if they have a lot of those, that’s an indication that they have the talent, they have the passion, to do the work that you’re trying to hire them to do?
Joel: That’s right. If they don’t treat it as a job, it’s a passion. It’s a career for them, and you want to see people who are building careers.
Andrew: So the other question I was loading up earlier was experience versus talent. Do you need to see that they’ve done the work before? Do you need to see that they have a history of doing the work or is talent enough to see that they’ve done it on the side, that they have the ability to learn it?
Joel: And it depends on what position you’re hiring for. But typically, when you’re hiring in an organization, you’re hiring somebody to do something you as an organization know how to do. So, if I’ve got five developers and I’m hiring my sixth developer, I’m interested in the most talented person I can get.
I don’t care if they have perfect experience, you know, if they haven’t worked in this particular language but they’ve worked in a related one, that’s fine. When experience is valuable and when you should look for experience is when you’re hiring somebody to do something that you don’t know how to do. You know, maybe you’re a software company, you want to launch a service as a division, well, yeah, go hire somebody who has run a service as a division because you as a company don’t understand that.
Andrew: I see.
Joel: But in most cases you’re hiring, you’re really just looking for the most talented person because you already know how to do what it is, you just want the person who can do it best.
Andrew: All right, that makes sense. All right. There is something here that I want to ask you about related to this and it’s also related to your lowest point. Let me take a moment and just tee that up because I think that’s going to be a deeper discussion here. The second sponsor is a company, speak of hiring, it’s called Toptal. Have you hear of Toptal or I’m about to introduce you to it?
Joel: You’re introducing me to that.
Andrew: I’ve been doing this with guests so much that now they tell me that they’ve found out about Toptal because of these interviews, and they end up hiring Toptal. Here’s what Toptal did, they said, “You know, it’s really hard to hire developers. It takes a long time. What if we become the experts in it? What if we put together a book of all the top developers in the world? The guys who could work at Google and Facebook but choose to go back to their home countries or stay in their home cities and just work from there. And then when a company wants to hire, they’ll come to us. They’ll tell us how they work. They’ll tell us about their quirks. They’ll tell us about their needs. And we’ll go to our network and we’ll get just the right person and place them.”
This idea to me, frankly, seemed so . . . it just didn’t feel like it was going to work out, because hiring is so tough. They’re going together a book of people or like a contact list of all these people? And so frankly, when they were first suggested to me as an interviewee, I said, “Oh, it’s interesting, but I don’t think that’s going to work out.” And then they told me the numbers of how much they place, how long people stay there, frankly, their revenues, and I started to be amazed. And I interviewed the founder, and through that, I discovered so much about their growth and I understand now why Andreessen Horowitz would back them. Because Andreesen Horowitz saw what I didn’t see much faster.
This is a company that mastered hiring. If you’re out there listening to me and you’re looking to hire developers, who don’t hire from Toptal, here’s what I would recommend you to do. Go to this URL I’m about to give you, schedule a phone call with them, then tell them what you’re talking about, what you need. Just
challenge them with . . . maybe challenge is not the right word, just open up.
Say, “Here is what I’m looking for and here is how we work.” Let them go out there to their network and find the best developers for you. And I say for you because they’re going to figure out what you need with you and then help you find the right people for you. And it could a part time, full time person, a team of people who just need to work together, whatever it is, they’ll match you up. If you like it, you can hire them. Often gets started within a day or two. If you don’t, you don’t have to work with them.
All right. Here is the URL, it is . . . well, actually, let me tell you what’s at this URL, 80 hours of Toptal developer credit when you pay for you first 80 hours. They’re going to give you 80 hours of developer credit if you come to this URL. And that’s an addition to a no risk trial period of up to two weeks. They want you to be 100% satisfied.
So here’s the URL, toptal.com/mixergy. That’s Top, as in top of your head, Tal as in talent, toptal.com/mixergy. Really good company. I see their numbers right. Oh, I wish I could talk publicly about it. I wish I could invest in their company. Here is the thing, people tell me so much private stuff that I go, “Why didn’t I invest in this company? Is it awkward for me to ask them to invest?”
Joel: I don’t know, no.
Andrew: It’s not awkward. With these guys, nothing is awkward. Except for one thing, they’re a very secretive company. They are like everything matters to them. Every word they utter matters, every pixel on the website matters. Everything, everything. I wonder if one of these guys is going to get a heart attack at some point, but they’re very calm. But they stress everything.
All right. Here’s the thing. So you recruit these people really well, you tell them the vision, you get them on board. One of the hardest parts then is letting them go. And frankly, it’s so hard that I’ll be honest with you, Joel, sometimes when I hire people I think, “I don’t know if this is going to work out. This is my vision. I believe in it. I’m willing to do die on this hill. But frankly, there’s a 10% chance they’ll take this hill, there’s a 97% chance that we’re going to die on it. How do I tell them this vision and get them bought in knowing that we could just not make it work and I’ll have to let them go?”
And you’ve had a situation where you did do that and you did have to let them go. Why don’t we start with what happened that you had to let people go?
Joel: Yes. So like many tech companies who were around in the early 2000, so I was at a trade show in Atlanta waiting for Jack Welch who is going to release his first book after coming out of GE, so I wanted to watch and hear what the great CEO had to say.
Andrew: And by the way, a great a book. He was also a great writer. Yes.
Joel: Yes, yes, yes. “Winning” I believe was the title of it. And so, I’m waiting to hear him on CNBC when the first tower gets hit by the airplane. And then we sit around for a few more minutes and the second tower gets hit. And, you know, it was pretty obvious at that point the world had changed. And so, I remember going to a board meeting about six months later when business had basically just basically stopped. And, you know, I told the board, “Hey, guys, you know, I think we’ve got a great team. I think we’ve got a great product. But if it was my money, I’d take it and go home because when I talked to customers . . .”
I had one customer actually say to me, “Joel, this the best product I’ve ever seen from a startup,” and I was started to get excited, you know, and he said, “If it cost a dollar I can’t buy it.” And so, I went to the board meeting and said, “Look, guys, if it was my money I’d take it and go home because I don’t know when I can tell you things are going to turn around and I don’t have any other play.” I don’t know what to do. And famously, one of the board members said, “We have a checkbook, if you need more money let us know.”
Andrew: Really? Why?
Joel: He believed in us. He believed that we did have a great team. He believed that we did have a great product and he was experienced enough to know that, well, the situation was bad. It would probably get worse and people would start spending money. And pretty soon after that we did, you know, start getting a little bit of traction and delivered 31 consecutive quarters, a double-digit growth. But obviously, we had to cut back the team at that point and lay some people off that, you know, you never want to do that. And they had bought into the vision, they were all in, they were good people. But we just couldn’t support in that economic environment to carry everybody on the team.
Andrew: How long did it take till things turned around in the economy so that you can sell?
Joel: Yeah. It took about a year before we got kind of . . . you know, you could tell that things were consistently getting better and it was tough. But, you know, most businesses and then, you know, then we went through on the other end with that business. We went through the day [inaudible 00:42:32] failed, and we saw our metrics kind of flatten out as well. And so, we kind of . . . it was our business was book-ended by the towers going down and the great financial crisis.
Andrew: How do you keep your mindset right? How do you keep yourself from losing confidence and giving up on the business or checking out in that year when you don’t know when it’s going to end and things are going to get better?
Joel: Yeah. The phrase I use in the book is “Paranoid optimism” which is kind of an oxymoron. I understand, but yeah, you have to be paranoid and try every idea, try to come up with everything you can do to make things better and while at the same time you have to believe that in the end things are going to work out, and that is tough. The CEO job can be a very lonely job because of that, because you can’t really share all of that with everybody in the organization.
Andrew: You’ve said paranoid optimism is also what helped you maintain credibility with your people. How does paranoid optimism help you maintain credibility?
Joel: Well, you have to be very careful with CEO not to just go around and tell everybody that everything is going to be wonderful and we’re going to win. You know, people can see when you’re not selling stuff, and you have to be honest with them and say, “Yeah, I don’t really know when this is going to turn around. I believe this is going to turn around but I don’t know.” But a lot of CEOs or what I call the cheerleader CEO, you know, they’re down 40 to nothing and they’re still . . . you know, they cheerleaders are going, “D-E-F-E.” And you’re like, “Okay, guys, you’re down 40 to nothing.”
And so, you can’t be so enthusiastic about your business that you avoid reality. You have to . . . it’s the, you know, Admiral Stockdale referred to it as the Stockdale Paradox for the prisoners of war in the Vietnam prisoner of war camps, where the ones who did the best were the people who were realistic and said, “We may never get out of here. All we can do is live today.” The people who said, “Oh, we’ll be out by Christmas. We’ll be out by Easter,” those people didn’t make it. And so that’s a key with startups. You have to be, you know, realistic while at the same time having optimism.
Andrew: I’m looking here at a quote from you from your book. You said, “The CEO’s role is that of shock absorber for the inevitable highs and lows that a business will fail.” So if things are going great you have to say, “Yeah, but they could fall apart at any time.” Things are bad you say, “Yes, they’re bad. We’re acknowledging it, but if things turn around and if we turn around, if we’re prepared we can turn this business into something big.”
Joel: Absolutely. I think that’s an important concept and it’s why the CEO job is emotionally difficult is because when your team is winning you really need to hold back a little bit. And you see this with, you know, the great coaches in sports, a Bill Belichick. I mean, I would have loved to have been in the half time last year when his team was down by 24 points. He wasn’t throwing things. He wasn’t telling people they were idiots. He was telling them, “Hey, no, we can do this.” Now, if they had been up by 24 points he might have been throwing things and telling people what a bad half of football they played. And that’s that shock absorber role.
Andrew: If they were up, he would have done that.
Joel: Yes. If they were up, yeah, absolutely. And so that’s that shock absorber role. You’re balancing the natural emotions of the team.
Andrew: I noticed you have a lot of sports references. Do you read books about sports? Do you read books about coaches?
Joel: Certainly. I mean, there is a lot of similarity. The CEO job is very similar to a head football coaching job in a lot of ways. And I played college sports, I played college tennis, so I’ve been around sports my entire life. And so business performance and personal performance in sports, they’re not two different things. They’re sides of the same coin.
Andrew: Why did you decide to sell?
Joel: Well, at a fundamental level we had investors who had invested nine years before in the business and we could give them a 10x return on their money, as well as become personally wealthy and everyone on the team, the day the deal closed got a check. And one of the funny things about that is they’re, you know, when that happens, there were some people who got, obviously, small checks, some people got big checks. And you kind of expected the people with big checks would be the ones that had most changed their life. And it was funny, there were a few people who had joined the company relatively recently and got, you know, relatively small checks, 30,000 or 50,000 kind of checks.
And some of those people were the most appreciative because they went from having zero in their bank accounts, living pay check to pay check, to suddenly having 50,000 in their account. And some of the people who I gave $1 million check too they already had a million in their, you know, net worth. So, one to two was great. They were happy, but it wasn’t as life-changing even as some of the younger ones who went from, you know, nothing in their bank account or maybe being in debt to suddenly having a little bit of extra cash and a little bit of freedom.
Andrew: What did it allow you to do on a personal level?
Joel: It allowed me to be very picky about what I do and how I spend my time. You know, I don’t have to have a job at this point, and so I can do projects and do activities that I think use my strengths to make a difference in the world.
Andrew: Did you have to do anything fun for yourself that you couldn’t have done otherwise? Did you go sailing or something?
Joel: Well, by the time we closed the business we had three kids, three young kids. And so, I did take advantage of private air travel for vacations numerous times.
Andrew: So, kids, we’re going to go together, but we don’t have to deal with everyone being frustrated and screaming and kicking the seats at the guy in front of us. Oh, that’s great.
Joel: Yes, yes. That was nice.
Andrew: Where did you take them?
Joel: We spend a lot of time in Colorado and Utah skiing as our big activities.
Andrew: I want to quickly talk about the business, the most recent business you started. And I know we’ve got just three minutes to go here.
Andrew: Khorus, I feel like this was the one that wasn’t the most passion play for you, the biggest passion play. Am I right? Like this is something you understood the customer, you cared about him, the customer was you.
Joel: Yeah, in most other cases when I did the business, like I said, my wife was the technical expert, so it was kind of her idea then I did the business, CacheIQ, it was my business idea and I ran the business. This was my idea and this was an attempt to take my knowledge of CEOs and what they do and try to put that together in a systematic software approach to help CEOs be better at their job.
Andrew: And so, you put this together. How did you get the first customers there?
Joel: Yeah. First customers were people that knew me, knew my reputation, knew I had been successful as a CEO.
Andrew: Because you had been speaking at that point, you’d had a public online presence. I see. It was people who understood your mentality and said, “I want it,” and you said, “Here is the software that can do it.”
Joel: That’s right.
Andrew: I’m sorry, go ahead.
Joel: I was going to say I started about seven, eight years ago teaching a course for CEOs here in the Austin area. And so, you know, there is probably 100 people or more who’ve taken that course as well.
Andrew: This is a full-on SaaS. I mean, even the pricing, it’s $15 per user per month, that’s on a high end. There’s a free version of it, so we’re talking freemium. It lets people do strategic planning, goals and performance, talent management, interactive [inaudible 00:50:11] chart. This is like a world of change from going to enterprise where you’re selling for hundreds of thousands of dollars to now selling $15. Was that a tough transition for you?
Joel: Well, you know, we’re happy to sell to large enterprises and at $15 per user, you know, it adds up eventually.
Andrew: I see. If you’ve got 1,000 employees, that’s a $15,000 a month commitment.
Joel: That’s right. So, it can be significant. But the big thing is this is about the CEO having a platform. And currently, you know, whether it’s Fortune 500 or startups, most CEOs have no software they use other than email encountering to run their business. And so, this is really about giving the CEO a platform to manage the organization, get the organization going in the direction they want to move. Turn the organization. You know, and that problem really starts once you get above 25 to 30 people and you can’t get everybody in the room anymore or you have multiple locations, you get multiple silos developing, it starts addressing those kind of problems as you grow the organization.
Andrew: And for companies with 20 or fewer people, it’s free. They just go to your site and sign up.
Andrew: And it’s all by demo. Even though it’s free, we need a demo in order to get started.
Joel: Yeah, because they’re buying something they’ve never bought before. The CEOs never had a platform. So they don’t . . .
Andrew: When you say platform, what do you mean by that?
Joel: Yeah, so just like I would consider Salesforce, a platform for the sales executive in an organization, we consider this a platform for the CEO to do their job. So you run your . . .
Andrew: As opposed to managing, using an Asana or something, this more about the team and understanding what they’re doing and what motivates them. Am I right or am I oversimplifying?
Joel: Yeah. So, when you get to enough size, let’s say, you’re at 500 people, you know, is kind of the typical kind of core customer we want to go after, you’re not in the same details that an Asana or a project management. You can’t be involved in the details of every project, right? Your job is to figure out what the direction is, set the direction, and make sure everybody is rowing in that same direction. And that’s very hard. There’s no common set of knowledge, typically, across the organization. Each functional area has their own software, but there’s nothing that ties it together and makes sure everybody is rowing in the same direction with the same ultimate goal.
Andrew: All right. How much revenue did you get Khorus to before you moved on?
Joel: So we just became cash flow positive, and so I now turned it over to a CEO, you know, in a position where at least they can, you know, continue to grow to grow the business. Hopefully, we’ll be at a million in an annual recurring revenue here this year.
Andrew: A million annul recurring.
Andrew: Congrats on launching it. Congrats on a successful career. The website for anyone who wants to check it out is Khorus, spelled, K-H-O-R-U-S, khorus.com. The two sponsors that I mentioned are the company that will help you hire your next great developer. It’s called Toptal, toptal.com/mixergy. And the company that will do your books right, software and services for less probably than you’re paying for software right now, it’s called bench.co/mixergy. Thanks so much for doing this interview.
Joel: Glad to do it. Yeah, have a nice day.
Andrew: You too. Thanks. Bye, everyone.