Jim Franklin, CEO of SendGrid based in Denver, CO, discusses scaling, culture, market strategies and his journey into one of the fastest growing start ups to come out of Colorado.
Jim joined SendGrid after it had been founded and funded in order to build and grow the company past the startup stage.
We’ve been using SendGrid to send our transactional emails for our various properties since uGurus inception—I’m definitely a fan.
- Jim’s Start at SendGrid 00:20
- What does SendGrid do? 1:10
- Product and Service 3:40
- Scaling SendGrid 9:22
- “You are never too small to be thinking about culture” 14:22
- What should early start ups do differently 17:18
- Market strategies 19:20
- Daily, Weekly, Monthly practices 23:28
- What do you know now that you wish you knew before 27:48
- Founder and CO-Founders 32:41
- Trends 33:55
- Growth 36:06
You can find more information about Jim Franklin and SendGrid by visiting their blog, and following them on Facebook and Twitter.
Brent Weaver: I’m Brent Weaver. You’re watching uGurus, the most watched web series to become a more profitable and in-demand web professional. Today I’m in Denver, Colorado, hanging out at the offices of SendGrid with their CEO Jim Franklin. Welcome to the program.
Jim Franklin: Thanks. Great to be here.
Brent Weaver: So Jim, how did you get your start in SendGrid?
Jim Franklin: That’s kind of a long story. We started in Boulder in the summer of ’09. I’ve been in Boulder since 1992, working with start-ups in one capacity or another. In 2010, I had left Oracle to really just be a board member and investor, full time advisor to start-ups, when Brad Feld, who was an investor early on in SendGrid, encouraged me to come back to work full time as CEO at SendGrid. Over a multi-month process of the board members and especially the founders, I realized what a special company that it already was back there in spring of 2011, I ended up joining the company.
Brent Weaver: Now, for those of us that aren’t familiar with SendGrid… We use SendGrid at uGurus. For those of us that aren’t familiar, can you give us maybe the quick elevator pitch on exactly what SendGrid does?
Jim Franklin: SendGrid rather simply moves mail from a web application to the inbox of the customer of that web application. It would be best described through examples. If anyone here has used Pinterest and you received an email from Pinterest, that’s really SendGrid who sent you that email on behalf of Pinterest.
Or if you’ve reserved a car with Uber, and Twilio that sends you the text message saying your driver is arriving and it’s SendGrid who sends you the receipt so you can expense that through your accounting department. If you’ve rented a house with Airbnb and you get the directions to the house or the rental contract or the receipt, that’s SendGrid underneath that, moving that email from Airbnb to the Airbnb customer.
A specific problem we solved is that 20% of those emails go missing. If you try to do it yourself, sending email from a Cloud-based application to get to the customer, it doesn’t happen reliably. That really has to do with spam, that if you… The good and the bad part of Cloud computing is that it’s very easy to create a new website, create an application.
When you’ve created something new, you start to send mail from a new IP address. The receivers, Gmail and Hotmail and Yahoo, are very skeptical of new senders. They like to throw your mail into the trash or throw it on the floor or bounce it into outer space. So by sending it through SendGrid first and then we send it to the customer, it becomes a trusted sender and gets to the inbox.
Brent Weaver: We named a couple of pretty big apps – Pinterest, Airbnb, Uber. For any web professional who is not currently using SendGrid, they’re probably experiencing SendGrid at some level.
Jim Franklin: Yes. We have over two and a half billion unique email addresses we send to every month. If you are doing anything at all interesting on the interwebs out there, you’re receiving email from SendGrid.
Brent Weaver: You mentioned two and a half billion email addresses. How many actual emails are you guys sending? Give me an idea of volume here.
Jim Franklin: Twelve billion emails per month we send to those two and a half billion unique addresses. That’s about 5000 per second 24/7. Another way to think about it is like Twitter. We send as many emails as Twitter sends tweets.
Brent Weaver: That’s pretty huge.
Jim Franklin: That’s a lot of mail. It’s about 2% of the world’s non-spam email. Our mission is to send the world’s wanted mail. We send the right message at the right time on the right frequency. That’s wanted mail.
Brent Weaver: On this interview series, I’ve been talking to a bunch of agency owners. Google has service companies. They’re billing by time. They’re building applications, websites, marketing campaigns, all that kind of stuff for customers. You guys are different. You’re a product company. How is that different?
Jim Franklin: Product and service companies are vastly different. What’s interesting is that a service company has to think about contracts and revenue and changing time for money. There’s some advantages to that. Your customers get exactly what they want because that’s what you’re paid to deliver, versus a product company – you have an internal focus. You build things on your own schedule and release products when you’re ready. You don’t have that time-based demand from external customers.
What’s interesting is that software is a service we blend it to at SendGrid. We provide a product as a software service, but we really focus on the human element. We have a very good 24/7 support group as well as an account management group, developer relations, a group of people who get to wear these blue T-shirts and travel the world, attending hackathons and meet-ups and startup weekends and those kinds of events.
We want to be with people at that moment of creation, of creating something new and just to wire in SendGrid from that very first weekend that you’re starting something, because at an agency, when you’re building applications, the general rule is that there’s so many easily accessible APIs to make your job easier. They’re free to start. It’s a no-brainer to wind in things like SendGrid early on in projects. It’s only when you get scale – you’re sending thousands of messages per month – that you start to pay like $10 a month. It really is a trivial cost and it’s not paid until after your application has a lot of traction.
Brent Weaver: One of the things that comes up often in these conversations is that product and service dilemma, because it seems like most of the companies that are service-based are looking over the fence. They think the grass is maybe a little bit greener on the other side, whereas you guys are more purebred product… You have that customer service element, the software as a service element. Why do you think it is that service companies have such an obsession with thinking about maybe creating a product one day?
Jim Franklin: That’s an easy one. I’ve been on both sides of the argument for over 10 years, maybe 20. As services people, you look at the product side and say “Wow. There’s great scale and margins there.” When you look at the service business, you think you deliver what the customer wants but you’re trading time for money.
That’s a fundamental limitation. I was originally trained as a lawyer and accountant. Those professions also trade time for money. No matter how expensive a lawyer – you charge $1000 an hour – you still have to build 2000 hours a year. You’re limited by your time, whereas SendGrid we’re a product company, we’re sending 12 billion emails a month.
We could send 13 billion for the same cost. I could be sitting on a beach in Jamaica – spring break around here two weeks ago – and people self-serve. They come to our website, give us the credit card, send mail, and we get paid. It’s just beautiful high-margin scaling business.
I’ve been part of many discussions where a service company says “We’ve created these tools to help us deliver our service. We’d like to productize them.” A part of our product company would say “Our customers have a problem and then we sell them our products, and now they have two problems.” Their individual problem plus this product that just showed up.
They’ve got to figure out how to use it and apply it to solve their first problem. If you’re a product company, you think, “Wow. I wish I had a service component so I can provide the whole solution to the customer and solve their problem.” As a services company, you think, “Wow. I’d like to take these tools and turn them into products.”
But there are many differences to that. It’s really like oil and water. They’re different kinds of organizations. I think people have DNA where you’re either service or you’re product. If you’re a services company and you really want to create a product company, I suggest you start with a different entity and a different management team and a different funding source, and just take your toolset and put it into that entity. Maybe you own 15% or 20% of it. Let someone else who are really product people – that’s how they live, breathe and think – take that to market.
It’s even things like the accounting system between the two companies would be different. You have time and materials on your services business, and you have dedicated software that’s built for recurring software transactions on a product company. The sales teams are very different – selling services versus selling products.
Brent Weaver: One of the things you mentioned was that SendGrid has this service element. How have you structured customer service at SendGrid? How does that work? What makes it different?
Jim Franklin: We look at SAAS, software as a service. We like to put a strong emphasis on the service piece. Really from Day 1, the very first hire at SendGrid past the first to-be founders, who were all technical, was a customer service person who could answer questions on how developers work with our infrastructure. That freed up our developers to continue to innovate and build on the product. We want to make sure that the developers could have that high level of service.
We do it through a multi-tiered support group that runs 24/7 – phone, chat and email – and with agents based here in Colorado, both Boulder and Denver, as well as Anaheim and also over in Romania, to help cover around the clock service. We also do service on the web to have a very good documentation. We find that developers globally can read English and can understand code samples by having a lot of code libraries so that people can really self-serve to the extent that they can.
Brent Weaver: When you came into SendGrid, it was like post-founding. The company had been created, they had a base product, and they brought you in at that scale level. What were some of the challenges that you had to overcome to take a company from a founding level to scale like you guys have?
Jim Franklin: There was about 20 employees when I joined. I think that there are some nuances when you’re just founders. It’s just us. Then you get the first 10 employees and you have a few people who are non-technical. That creates some issues.
Then as you start to get to 20 people, and you’ve got maybe managers and individual contributors, I find that at the 25th person, a very interesting thing happens. That 25th person shows up and they think there’s a company. They’ll ask you things about “Are we open on President’s Day? What’s out maternity leave policy?” and all of these things. The founders tend to look at each other and be like, “Who is this person?” It’s just us, right? We’re all here working hard to try and change the world in one way or another.
I really like joining a company with 20 to 25 people because you’re big enough and they have completely good revenue traction and the growth curve was already established, but really just to take it and just remove blocks and obstacles and do things like having weekly all hands meetings and running management team meetings and having a hiring process.
It’s not just “Hey, I had beers with the founder,” you show up Monday and bring your own computer. It’s just basic things like having an office. Our employees from California work from home. There really wasn’t a center of gravity in that group, so we put a flag on the ground and said, “We’re going to have an office and have an office manager and all wear the same kind of T-shirts every day and recognize birthdays and really create that sense of place.”
Our biggest challenge has really been communication – just internal communication. Having a technical office in California and a non-technical office in Colorado can create a bit of a divide. The five most dangerous words in business are “How hard can it be?”
Before I joined SendGrid, part of my playbook as the CEO was to have one office. I think it’s very important as you’re scaling from 20 to 100 people to have that communication between sales and marketing and accounting and service people and technical people. It’s a big challenge even if you’re all in the same location. But I thought, “Denver, Los Angeles – direct flights, one time zone. How hard can it be?”
The first big mistake I made was we had Rackspace. It was a great partner, but they forced us to an external deadline. When you work with bigger companies, that’s called dancing with elephants. When they said “You need to be ready to go on this certain date,” I said, “Okay. We’ll do it.” But then, it puts pressure on the technical team to make sure it got done. That was not well received – to have a non-technical person tell technical people what had to get done by a certain deadline.
If there was a crack in the organization, I made it a lot wider in my first 90 days. To heal that crack, I applied the formula of jet fuel and alcohol. That means you fly back and forth a lot. You can see each other as well as HipChat and LifeSize and all those other technologies.
Then I’d ask the founders in California. I said, “Okay. What would you like to do to these non-technical people in Colorado?” They said, “We would like to shoot you.” I said, “Fair enough. We’ll fly down there.”
We went to a paintball range. Being in Colorado, once we showed up in shorts and T-shirts, figuring it’s somewhere in California, the people knew what they were doing, showed up in full camo gear and custom guns. Let’s just say it was a really fun afternoon had by all. Then we went for a nice dinner afterwards.
It’s that kind of building bridges. It would have been just symbolic. But over the following months, I think what really helped pull the company together is where we institute our Mexico kickoff trip. About the third week of January, we spent four days together in a resort in Mexico. We’ve been in Cancun and Puerto Vallarta and Cabo these last three years. It’s great to bring the whole company together for four days a year and act like we’re one company. We like to recognize the achievements from the previous year and set goals for the next year.
Our strategy is actually on our T-shirts: “Scaling everywhere with innovation and double digit growth.” People know that when they come back from Mexico. I try to remind people that when you are using HipChat or WhatsApp or SnapChat or whatever your communication device is, and you’re talking to another SendGridder on the other side, remember they’re smart, they’re hardworking and they have good intentions. Sometimes that is lost when you’re using electronic communication.
You can get…it’s easy to get frustrated with people. That has been one of our biggest challenges early on. It has been to keep the communication among departments. There are now different levels within departments.
Brent Weaver: When people talk about culture and they’re like, “Let’s have a ping pong table,” you’re looking at culture as a much bigger animal. You’re looking at culture as like the relationships, people’s temperament towards each other, and all that kind of stuff. At what point is the company maybe too small to be thinking about culture at that scale?
Jim Franklin: You’re never too small to be thinking about culture. I think it really starts with – if you were having to start a company together – by just how you pick your co-founders. It really starts with… Step 1 is to know yourself. What are your own values? It was the summer of 2003.
I had been fired for the second time from responsible positions, as a VP of Sales or CFO of venture back companies. I was sitting there thinking, “I’m married. I’ve got kids. I should not be getting fired so much. Why is that happening?” I thought, “Getting fired, there’s conflict.” It’s a good exercise to think back on your life about where you got conflict with people and recognize that’s two value systems running into each other. Try to see what value were you expressing, what value were they expressing. Not judging, right? They’re just different.
In that case, it was openness. As a CFO, I like to tell people pretty much everything in real time all the time, just very wide open. But I worked for a CEO who liked to play it close to the rest on a need to know basis only. There’s not like a right way or wrong way. There’s different ways. Obviously we had a lot of conflict because I didn’t want to tell employees what our cash balance was, what our burn rate was, and how we’re doing on financing plans. It’s very much related to another value of trust first. I like to put trust out. You get trust back.
I had something to think about – what those values were and how to express them and how to interview for them, because I wanted to interview a management team and make sure I fit. When you get fired again and have those uncomfortable conversations with your spouse at 10:00 at a Monday morning, you’re like “Hi, honey. I’m home.” It’s like, “What are you doing here?”
That summer, we came with the Four H system: Honest, Hungry, Humble, Happy. It’s a way to interview people for that culture. When I evaluated looking at joining at SendGrid, that was my only criteria. It wasn’t market size and all that stuff. It was like “Is it a 4H board? Are they 4H founders?” By spending time with them, there’s good questions. The happy variable surprises people. That’s one of the four variables.
The interview questions – What do you do for fun outside of work and family? What you elicit are passion stories. You want deep passionate stories that reflect a lot of goals and striving, a lot of the hunger and other values.
It makes for a really interesting and fun dynamic workplace. I think that the culture starts right with the co-founders, and then through the management layer and to employees, but also the customers, partners and most importantly shareholders. You want to make sure that your shareholders are well aligned with your culture from Day 1.
Brent Weaver: You guys work with a lot of web agencies, web professionals, freelancers. You guys have tons of those types of clients. What’s maybe one or two things that you see them doing that maybe they could do differently or better?
Jim Franklin: Just the use of your APIs. There are so many that whatever problem you’re trying to solve… Did you find yourself writing anything custom? There’s probably a web service out there for that. If there isn’t, that would be a great project for a startup weekend or something else. I think there’s just that sense of awareness that if you feel like you’re doing something that’s rote and you think “Wow. There’s got to be a better way.” The API economy is so robust.
There’s probably something that’s built out there as a web service you can call to help make you more efficient in your work.
Brent Weaver: Do you find that companies still are probably writing too much of their own custom features or they’re not doing enough of that?
Jim Franklin: Yes. We find that really across our customer base, I think that’s part of work with early stage founder types. There’s this strong sense of “I can do that.” Again, it’s that “How hard can it be?” mentality. How hard can it be to set up your email or your billing system or your document storage or whatever it may be? And that Rule 1 of Cloud computing in Bessemer’s top 10 laws is “Thou shall use other cloud services.” I think that that’s…
Brent Weaver: We might be writing that on one of our walls.
Jim Franklin: Specifically at SendGrid, we found some limitations to that. Rackspace is a great partner, but when you really become part of the cloud like SendGrid has, then you really need to own your own stock. We have our own data center now in San Jose.
SoftLayer is a key partner for us as well. But there are some limitations to those rules. But that is definitely a great general rule – really trust other cloud services. That really makes you faster and they’re very cheap to use and to get started with.
Brent Weaver: In terms of strategy, one of the things… When I talk to web pros, it feels like they almost have a two-person business and they have three or four go-to market strategies, like “Who’s your customer?” “Business is.” How have you guys picked your strategy in terms of what kind of markets you’re going after? Is it really specific, or do you guys just have a broad spaghetti on the wall type of thing?
Jim Franklin: That’s a great question. I work with a lot of startups in many capacities and I love to ask this question: “How big can you be just doing what you’re doing today?” They say, “We’ll just do this one market. We’ll be a $100 million business.”
I’m like, “Great. I don’t know what you hear, but all those other things…” Let’s just focus on that one, right? This one market, and see how big you can be doing that. Having looked at and been part of a lot of venture back companies, I’ve got a sense for what you can do at five million dollars, 50 people, three years. That unit of work – they can solve a fairly narrow thing. It’s just a chronic problem among early stage companies to think that they can go do many things simultaneously. I look at them and say, “You and what army?”
At SendGrid, we’re having 200 people. It’s a pretty good size for a group of people. It’s remarkable how it’s a paradox of focus that the more you focus in, the more opportunity you see. Rather than say “We want to go do SMS and we want to do in-app notification. Let’s become the enterprise communication API layer of cloud computing,” those are different companies. That’s what Urban Airship does on the one side and Twilio does on the other side. It takes all their attention really just to focus on doing this one thing very well.
Even for that, we do it for early stage companies. If you’re a healthcare company or a financial services company, or if you are a Global 2000 company, you might not like what we do. Some of those companies have asked for SendGrid in a box. They want an on-prem version of what we do. There’s no around here who is thinking about putting SendGrid n a box and sticking it behind the firewall. We’re all cloud, so we really have to have that strategic discipline to stay focused on dong one thing very well.
That being said, I think that a focus of about 80% is the ideal. If you can have 80% of your energy, like on the oak tree on your big thing, which is for to email infrastructure for developers. But I think it’s good to have some sapling, some small trees nearby. At SendGrid, we did listen to our developer customers, ask for an application on top of our infrastructure, which is our newsletter application. It can be used by non-developers, but mostly it’s used by developers to send newsletters to their growing customer bases.
That was interesting for us to see what can we do with the infrastructure layer. We learned a lot. We sent two billion of those newsletters for a month. We know there’s good traction and that if you were to partner with SendGrid and tie into infrastructure, you get big scale fast, which is really valuable for partners coming in like our own newsletter application.
But we also have some acorns. You have your big oak tree, the big thing we do, and we have a sapling like the newsletter application. But then it’s nice to have some acorn spread around the forest floor as well. We have SendGrid Labs in Rhode Island. It’s physically separated from the rest of the business. It’s just a few people.
I think it’s the sixth now, but it looks much like a Techstars team. They can knock out projects about once per quarter, head on that 90-day cadence. There are other cloud services that our core developer audience would like to have. As I mentioned, there’s that need for other APIs that you find yourself doing things that are repetitive. You think, “Wow. There must be a better way.”
That’s what our labs group is creating. We launched a product called Loader.io which does load-testing applications. We had over 10,000 signups in the first 90 days. That tells us, again as an organization, we can learn that there is a series of projects in the pipeline in labs that we can bring to our core audience of developers that they find relevant and useful.
Brent Weaver: What daily, weekly or monthly practice have you kept up with that has gotten you to where you are today?
Jim Franklin: Daily, weekly, monthly. Lifelong learner. You learn by teaching. Of course, there’s one famous saying: “He who teaches learns.” I do like to teach others through a variety of mechanisms, whether it’s Foundersuite or Techstars, or more formal. But mostly it’s an informal network of people who have started and raised money that have made some progress, much like 15 or 20 years ago when I was 28 years old and a CFO. Other people would help me a lot, learn things. It has been great to pay that forward and see those cycles go forward.
Part of the reason I like commuting between Boulder and Denver is doing audiobooks. People wonder, “How can you read so much?” I spend a lot of time on planes and a lot of time on the car. I’m always cranking through material in those venues. I think having some consistent patterns about how we work, having the daily standups at 11:30 every day. We do the weekly all-hands is very important so that…
Brent Weaver: The standup – is that a team-based thing?
Jim Franklin: That’s a management team. Yeah, so you start off with two employees or that first five or ten doing that stand up. It’s amazing how much happens in a day in a business just to take out little blocks. Patrick Lencioni wrote an excellent book called “Death by Meeting.” He called it “a CNN headlining or just headlines.” And shoot quick clarifying questions. It’s a great format. That’s another consistent thing is about how I run meetings. It’s called the 3D method: Download, Discuss and Decide.
So it’s live agendas. You show up and there’s a whiteboard with a marker. And you put 3 D’s on the top. Whoever’s at that meeting creates the agenda. From this group, I need to download. I’m going to tell this group something. Like we’re moving the office on May 1stt, so have your stuff packed up. Or I might need a discussion. Like I’m considering what I should do. Should I start a tradeshow program? And I want some wisdom of this crowd about what might be a good lessons learned on how to track results or something like that.
Or I might have a decision. Do I need a decision from this group today? I may make a decision on our new logo for some product. And we have to go to the printer. So do you like the first one, second one or third one. And really having clarity through the different types of conversations makes meetings much more effective and pleasant. Especially the distinction between discussions and decisions. So if you own a particular function, say it’s sales, you might want to have a discussion about, “Well should we have another layer of management between this person and that person,” you don’t want the group to hijack that end of decision.
Because discussions have a way of morphing into decisions. But as the discussion owner you can say, “Thank you very much. I’ve had enough discussion on that topic.” And you reserve the right that it’s your decision. And as the meeting facilitator what I do, I make sure we stay in those zones. If we want to make a decision, I’ll ask the person.
“Are you ready to move forward with a decision on this?” Do you want to have us go through that process? And we have a process for how we go through decisions. It’s called PROACT: what’s the problem, objective, alternatives, consequences and trade-offs,” just put it across the whiteboard.
It’s amazing how much time you spend on, “What’s the problem we’re trying to solve…? Oh, I thought it was a different problem right? What are the alternatives?” People always think there’s one alternative or two alternatives. A handy trick is just to write like one, two, three on the whiteboard. And people will keep giving suggestions until you hit three.
So then put four, five six, and they’ll give you more suggestions. And then rip out another sheet of paper and put one, two, three again. And you’ll get lots of alternatives. And it’s a really creative way to look through the consequences, trade-offs, and to come up with a collaborative decision on something. So there’s a handful of habits…like Lifetime Learner, or how to run meetings, that are things that I do on a daily basis.
Brent Weaver: You’ve gone off with several acronyms and things like that. Are these learned things? Or are these Jim Franklin originals?
Jim Franklin: Well it’s all a mish-mash of stuff. So the 4H’s is…I would say I came up with 3H’s and an S. And it was a few months later that another fellow Dave Fredericks that I worked with a long time, we eliminated the S, which stood for smart.
And that got replaced as Happy. We’d look at exit interviews. And when we would fire someone, we’d say, “Well why did that person not work out? Why was it a hiring failure? What did we miss in the interview process?” So by iterating on that, that’s how we were able to refine that process.
So the 3 D’s, we worked with Bernie Dana who’s a famous PhD industrial psychologies around Colorado that has helped a lot of venture-backed companies. He had this concept of Tell, Talk, Approach. But I like to repackage it into something people can remember. And the 3 D’s, so it’s a mix of things.
Patrick Lencioni, he wrote…one of his books had the “Hunger Humble Duality” in it. I was like yes that’s the key. Especially with salespeople. You want people that are Hungry, high striving. But Humble. Can learn from others. So there’s a lot of adaptation and mixing together of these things.
Brent Weaver: Nice. What’s one thing that you’ve learned over the last couple decades that maybe you wish you knew two decades ago?
Jim Franklin: The thing I’ve learned in the last three years at SendGrid I wish I knew is scaling is hard. I’ve never been as fortunate to be part of a business that was scaling so quickly. So things that I’ve learned along the way is to think about business in three phases.
I call it a Mousetrap: does your thing work? There’s Mousetrap people, founders, people who build stuff. There’s GTM, Go to Market. You need people who think about sales and pricing, and channels and all that. So are people buying your stuff or are you selling it? Or is something happening on that side. And then then Thin Ops. It’s that VP of Stuff role. Someone to make sure that the leases are signed, and the payroll works and you don’t run out of cash.
I think having that framework early on gives you more…clarify about a business. And at SendGrid, our stuff works, and people buy it, and we’ve got good access to capital. So “I wonder what we talk about all day.” Where on other boards are involved, other companies and usually they’ll have one of them solved. Like “Hey, we’ve got a great product. But it’s like we haven’t figured out the Go to Market yet and cash is tight, or it’ll get tight soon.” Right?
That’s a classic situation where you’ll have a good product and you’ll raise money. But it’s like, okay, raising money doesn’t help you solve a sales problem. It just gives you ammo to run a bunch of tests and try and find the right way to go.
I think maybe one lesson over the…a 20-year arc is I might have been less nice. I think that being Midwestern by background and a generally polite person, being nice seems nice. But it’s not as helpful to entrepreneurs. I found as I work with other people, I’ve become less nice and more direct. So if I see someone that’s obviously heading down a wrong road, I’ll be like “Hey.”
Oftentimes when I work with people, I like to always find the way it could work. If some entrepreneur comes to you and says “Hey what about this idea,” you could always say no and you’ll be right 99% of the time. Because most ideas don’t work, right? It’s like a combination lock, right? There’s like 100 variables you’ve got to spin and get right. And the founders of SendGrid got most of them right from the get-go.
But most business, it takes a long time. That’s why you have to raise money and get that runway, to keep spinning the locks until you find the combination that solves. And then the revenue takes off. And that’s just your first product-market fit, then you have to go do it again and go do it again.
I think being a little more direct with people about, “That’s not gonna work. Save your money,” so I’ve come up with a system, 3 Milestones, right? So if people are all enthusiastic about their thing, it’s like, “Hey we’re gonna go do this.” Right?
It’s like, “Great, go do it. Here’s a way it might work and let’s go lean into that. However, let’s set up 3 Milestones.”
That if you don’t get a cofounder, if you can’t get the technology to work, you don’t get a first customer. You don’t get an independent check from someone who’s not your mother, brother, fraternity brother, or something right? It’s like some validation, when do you quit? Not pivot, but just done. And say “I’m gonna go try something else,” right?
Because I’ve seen people go all the way into the ground so deeply they’re not able to recover, and come back and live another day in another entity. And go try and make something else work. And so I think if you set up those 3 Milestones…the reason it’s three is when the first one goes by, you’ll make excuses for yourself. Because you’re all excited about your thing right? And when the second one doesn’t work, you’re gonna excuses for yourself, because you’re all excited about your thing.
But when that third milestone goes by and you miss it, you know, try to remember this conversation we’re having. Remember that guy I met in Colorado? It’s like yeah I missed three things. Maybe this isn’t the thing I should mortgage my house and spend my 401K on, and essentially bankrupt my children and just go all the way in on. Maybe I should rethink what I’m doing so that we can live for another day.
Brent Weaver: In terms of startup founders, do you suggest companies go solo into the founder space or they have cofounders?
Jim Franklin: I’m a huge fan of cofounders. I think the best thing you can be is a cofounder.
The second best thing you can be is a founder, and somewhere down the way a CEO. I forget people think being a CEO is a good thing. I talk to a lot of startups. Like a Techstars class, you might have 30 people in the room. I’ll ask them, “How many of you are CEOs,” and all these hands go up.
I said, “About 10 minutes from now you won’t think so.” I said, “Who likes to attend meetings? Who likes to hang out with lawyers and accountants?” It’s like, no, they don’t want to do that. I said, “Who likes to build stuff?” Oh, the hands go up again. Right? So it’s like, do you like to build teams, get results through others. Think of a CEO as just a person who, the E, the execution. Someone who’s gonna actually do the business part.
They’ve got to hire people and sign leases. And do all that work of the business, right? I think as a founder, especially a cofounder, it’s much more interesting to think about the business design. Right? What is our mission, how are we gonna go to market? What’s the product gonna look like? How are we gonna raise money?
How does this all sort of fit together? The doing, the part of it, that’s what you can hire a CEO, to hire a management team…and go do all that execution part of it.
Brent Weaver: What trends are you following right now?
Jim Franklin: Well, one reason I joined SendGrid was cloud computing and SAAS was all new to me, as well as email. A number of trends, right, that were “brand new.” I said why did they hire me? Well, I have a long term interest in startups. So it’s great that startups have gone mainstream and are cool on a global basis.
So we pay a lot of attention to that trend. But really watching how cloud computing is being adopted geographically, how it spreads across the globe, has been fun to see. That’s a big part of our growth. But also the migration from really raw startups to enterprises.
So we talk to the world’s largest companies through our partners at Google, IBM and Microsoft. What we find is that if you are selling HP, Dell, all of these partners of ours. If you’re selling into the enterprise IT, cloud computing is a huge shift.
Just like there’s been the consumerization of that enterprise IT, there’s a similar parallel dynamic going on where a developer who works for a global 2000 company might be spending his nights and weekends at a hackathon. Where he runs into our developer evangelists and learns about SendGrid.
And then he brings SendGrid back to his day job. So when he’s building a production product for a major company, he’s starting to think about, “Oh I’ll use cloud services.” When I was at Oracle four years ago, that would have been hermetical to say “We’re going to use some cloud service in a production environment? That’s the kind of shit we rip out when we acquire companies. It’s got a big red machine. It’s all built here. It’s all integrated one solution.”
So there’s been a huge shift in the last even six months from what we can see, is that inside the enterprise IT world, there’s this acceptance of cloud services. For us that’s a huge adjacent market to not be just with the raw startups. But with people starting new things, but at very large companies. And being open to use cloud services to do their jobs better, faster, cheaper.
Brent Weaver: Very cool, what’s…200 people now where SendGrid’s at. Are you guys continuing up the scale curve? Are you guys continuing to have explosive growth?
Jim Franklin: You bet. So I count it by our Mexico trips. The first year, we had about 50 people there. The next year we had 120. Last year it was 180, and next year, it’ll be about 240. The year after that it’ll probably be about 300. I’ve not scaled a company through this particular growth phase, so I look out to mentors and other people who have scaled companies from 200 to 1,000, and I think we’ll be able to keep that trip going. Maybe up to 500 people.
A good tip, if you’re a product company, that’s about $200,000 per head in revenue…is a really helpful rule of thumb. So if you’re at 500 people, that’s about $100 million in revenue. So it’s 500 times the $200,000 per head. So it’s a great way to translate, if companies are shy about saying what their revenue numbers are, just ask them how many employees they have. Multiply by $200,000 and it’s a remarkably accurate predictor of revenues.
If you have a bunch of funds raised, you might be a little higher a-head of that. But over time, you can look and kind of tell that unless people are living on borrowed money, that’s kind of where revenues shake out, on a per head basis.
Brent Weaver: Very cool. Well Jim, we appreciate your taking the time for us today. Wish you guys all the best. Hopefully we’ll see you again sometime in the future.
Jim Franklin: Great, thanks for coming to SendGrid today.
Brent Weaver: Absolutely. All right. Well stay tuned for more great content from UGurus.com.