What can we learn from the person who ran the company that helped establish marketing automation as a category? Evidently, a whole lot. Now, Jon Miller, former CMO at Marketo, is doing it again as the CEO of Engagio. This time around, he’s using everything he’s learned the first time to help establish the account-based marketing space and build a leading company there.
Jon discusses viewing other companies as partners rather than competitors, how he thinks about the increased pressure to succeed given his prior success at Marketo, and ensuring his sales team is good at closing outbound sales, not just inbound sales. He reveals a few interesting tidbits about himself too, like the way studying physics helped him build companies.
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David Appel: Thank you for joining us for our second session of the day. My name is David Appel. I’m the head of the Software and SaaS Vertical at Intacct, which is the world’s largest independent peer cloud ERP firm. We got a great session for this one. This one is all about “After Marketo, What I Would Do the Second Time?”
This is going to be moderated by Doug Pepper. Doug is the managing director at Shasta Ventures, long time VC, some great companies, just two of them include Optimizely and Flurry, which was acquired by Yahoo several years ago. Then Jon Miller, who’s co-founder of Marketo. This is his second firm, Engagio.
As we were prepping, it reminded me of a story some of you guys might have heard. Sir Richard Branson wrote letters to himself, his 10 year old self, his 20 year old self, his 30 year old self. What we get the benefit of is Jon essentially writing a letter to himself about what he would do 10 years ago that everybody in this room can apply to how you build a great business.
Big fan of Engagio, a lot of Shasta Ventures companies on Intacct. I’m going to introduce Doug, and he’s going to introduce Jon.
David: Thank you.
Doug Pepper: Appreciate it. Hey, everybody. Thanks for the intro, David. It’s great to be here. As he said, my name is Doug Pepper. I am a managing director at Shasta Ventures. We are an early stage venture capital firm. We look for category creating companies both in enterprise and consumer.
It’s a great honor to be on stage here with my friend, Jon Miller. We actually go way back. We were in business school together in 1999, but I had the real pleasure of investing in Jon when he was the founding CMO of Marketo back in 2006 with his partners, Phil Fernandez and Dave Morandi.
Jon won’t brag about himself, but he is a very unique marketer. All at the same time, he is strategic, he’s quantitative, and he’s creative. He really helped pioneer the use of content marketing and B2B marketing.
More than that, what is so special about Jon is that he doesn’t just market a specific product or even a company. What Jon does is he focuses on defining and creating categories, and then building the leading company within that category.
Obviously, at Marketo, he was very successful in doing that. Building the company from the ground up, helping establish the marketing automation category. Ultimately, they took the company public in 2013 and then sold it last year for $1.8 billion.
Now, he’s doing it again. He’s doing it again with Engagio in the account based marketing space. He’s helping to establish that category and then ultimately building a leading company there.
This time, he’s doing it as a second time founder. I just think it’s an amazing opportunity for all of us to have him share with us what he’s learned over those many years of success and how he’s applying those learnings to doing things even better the second time around in Engagio.
This is really the Jon show. He’s going to do a 20 minute presentation as you’ll see. Then, we’ll sit down and do about 10 minutes of sort of fireside chat Q&A. Jon, thanks for being here and take it away.
Jon Miller: Thank you. Thank you for the kind words.
Jon: As you heard, I was one of the co founders of Marketo. Apparently, somebody told me the other day that I’ll know I’ve actually made it with Engagio when I no longer need to be introduced as the co-founder of Marketo first.
I have been in marketing technology my whole career. I am a marketing technologist, but I’m more than that. I’m also a father. These are my two kids. The fun fact is that my son, who’s obviously the older of the two here, he was actually born the exact same month that we incorporated Marketo, which has made it really easy for me to keep track all these years of how old Marketo is. They both turned 11 this month in case you’re following.
Another fun fact is that I was actually born here in Ethiopia or what’s marked here as Eritrea. When people hear this fact that I was born in Ethiopia, I often get the exact same question which is, “Hey, Jon, why are you born in Ethiopia?” I always give the same answer, which is that I wanted to be close to my parents.
That has nothing to do with marketing technology, or SaaS, or entrepreneurship. Of a little bit more relevance, and Doug alluded to this, is the fact that I studied physics for my undergraduate degree. I actually spent my summers doing fusion research at the Lawrence Livermore National Lab, got into MIT for a PhD program.
But I wanted to give this whole business world a try. I deferred MIT to go into management consulting and then very quickly into marketing technology from there. I haven’t looked back 23 years later, but I don’t regret the fact I studied physics. That quantitative analytical way of thinking has helped to guide my career both as a marketer and now as a CEO. You’ll see that through this presentation.
What I’m going to cover is just briefly the history of my story from Marketo now to Engagio, and then hopefully cover the key things you guys came here to see, which is the 10 things I’m doing differently. I’m excited. The best part is gonna be the conversation with Doug.
To set up, what is this new thing that I’m doing? At Marketo, we built a revenue engine where marketing was generating 80 percent of all the deals the sales team closed, which was using content, and inbound marketing techniques, and then our own lead nurturing lead scoring. It was wildly efficient and it drove a ton of growth.
What happened was, by the year before the IPO, the CFO, Fred Ball, came to me and said, “Hey, Jon, we want to invest more to grow even faster. How much faster can we grow?” He came to me in marketing because we are driving 80 percent of pipeline.
The problem that I had, or we had, was it’s not like I could just write more blog posts and suddenly generate more leads. I needed to find new ways to grow pipeline beyond this other thing that was working, but it was hitting its maximum.
We identified a list of target accounts that we really wanted to get into and we started reaching out to them proactively. I realized that there are two different styles of go to market here at play. What we had been doing at Marketo was fishing with nets. We didn’t care which company responded, we just cared did we get enough.
This new thing we were doing is much more like fishing with spears, where we were not waiting for them to swim into our net, we were reaching out to them proactively. That was the genesis of the idea I had for Engagio. Marketo and the other marketing automation tools are great for fishing with nets. I started Engagio to be the platform for fishing with spears.
After the IPO, Marketo stopped feeling like my company. You don’t leave the company you founded when it’s your own baby. But eventually, it got big enough. It stopped feeling like it was mine. It started to feeling just like it was a job. Then, that set in the motion the desire for me to leave and then actually go pursue this new thing.
I left in February of 2015 and then formally started the company on Pi Day, March 14th, 2015. We’re only a little under two years old now at this point. We’ve had an extraordinarily fast start I’m very proud of.
We’ve signed up over 100 customers and are currently at about 2.6 million of ARR, which is not a huge number compared to a lot of the other people on stage at this event, but for basically selling the product for one year, I’m very happy with that.
In order to achieve that success, we did a lot of the same things that we did at Marketo. I know this presentation is about 10 things I’m doing better, but the reality is Marketo was a success and a lot of the core things are the same.
Perhaps the most important thing that we’re doing the same is we identified a great market. Some people give me credit for creating marketing automation or creating this idea of account based marketing. That’s not true. What I did is I saw something that was existing, and then I helped to define it, and then I helped to amplify it. In so doing, yeah, a lot of the credit does go to my companies.
The key in both cases when I saw that there’s a good opportunity for a company was a category that had existing buyers with existing competitors, but the competition wasn’t so big and so strong that we couldn’t come in and ultimately win by executing well. Those are the markets that I like, because you don’t have to do all the category creation. You can instead do this category definition and bring that to you.
Great market, number one. Number two is pretty obvious, you have to build a good product. Thank you to my co founder, Brian Babcock, and the rest of the team for that. And, you have to have great sales and marketing execution.
We are eating our own dog food or, as I like to say, drinking our own champagne, driving high velocity sales deals, and growing the business. Great market, great product, great execution, those are givens. That fancy transition there is called the vortex for any PowerPoint nerds.
What are the things I’m doing differently? In a nutshell, at Marketo, we built a great product and ultimately led to a really good outcome, but I don’t believe that we built a great company. That’s a really important distinction.
Patrick Lencioni, I’m a big fan of his writing and his work. He talks about companies that are smart and companies that are healthy. I truly believe, now on my second time, that a healthy company with average smarts will beat a super smart company with only average health.
Did I get that right? I got that right.
Number one thing I’m trying to do different here is really focus my time, my energy on building a healthy company. The first thing that I’m doing there, there’s a bunch of things, is core values. It may sound like motherhood and apple pie to define your core values, but the reality is, it matters.
At Marketo, we didn’t define core values until we are about $20 million of ARR. What that results is, effectively, you have a culture, you have things that evolved, but it was actually balkanized with different groups and different teams having different sets of values. That ultimately made it hard to row in one direction as a coordinated team.
Marketo suffered, to be honest, as we got bigger because of that. Especially after the IPO, in some ways, it made it hard to retain people. Before the IPO, there’s a lot of drive towards, “Oh, we have this goal,” everybody is excited for this particular moment in time. On the other side of it, if you don’t have strong values and a strong culture, it definitely made keeping people a little bit harder.
At Engagio, my co founder and I defined our core values literally before we incorporated, just in very first stages when we’re still talking about how we’re going to split up our founder’s equity. As a sidebar, we have three couplets as you see here. For some reason, that’s a hell of a lot easier to remember than just lists of five or six values.
Second thing I’m really focusing on with my time is teaching my team how to be a good team and how to work effectively. Again, I’m relying on Patrick Lencioni here. At the core is just literally building the team trust. You need the trust. When that’s there, then what you can have is you’re going to actually start to have debate, and in some cases, healthy conflict.
If you don’t have a team willing to call each other out and push each other honestly and candidly, you’re going to be sub optimizing. Trust, and then on top of that, the ability to have conflict.
From there, you need to then have clarity and commitment. Once you’ve all decided what you’re going to do, you have to make sure it’s super clear and everybody is aligned against that. Now, you’re all moving in the same direction.
We’ve implemented an OKR process, which is a really key element for making sure that happens. You need to make sure that your team members can work on making each other accountable. It’s not just my job as the CEO to go to somebody and say, “You’re not doing well enough or you made a commitment on that OKR and you’re not achieving,” the whole team calls everybody out on that.
Then, ultimately, that works when people put the company’s needs before their department’s needs, before their own personal needs. Really trying to push that into my team and hope that they push it down to their team.
Now, once you have clarity about what you’re trying to do, once you have your core values, you need to then make sure that gets pushed into every operational process, whether that’s hiring, or onboarding, or even how do you do raises, how do you promote people.
All those processes need to reflect the way you’ve decided you want to run your business. I’ll be honest, that was overwhelming to me when we were small. How am I going to put all these processes in place as a little start up with 100 other things on my mind?
One of the smartest things I did in the history of Engagio is I pulled together what I called a culture day. We spent the morning talking about our core values and what stories share those values, what is our shared mission, what meaning do we get together from working here?
Then, we did a brainstorm around our ideas around all these topics, but then to actually put that into execution, every person had to sign up their name against one of these teams. Then, we held those teams accountable for actually putting these processes in place. As a fairly small company, we were able to build fairly mature processes around building a healthy company.
Now, the challenge I have is we’ve grown a lot since last July when we did that. We have new people, so we have to figure out a process in place for continuing to refresh that. We’re going to do it again on our second year birthday in March.
The last thing I’m really thinking about in terms of healthy companies is fairly tactical, but how do you have a good meeting? I don’t know about you guys, but whenever I’ve been in a job, Marketo or even earlier, when I fantasized about quitting, it was almost always I was in some meeting, where something is just boring.
There’s a reason why so many people check their phones and bring their laptops to meetings. Most meetings suck, right? We work really hard at teaching our company how to have good meetings. The number one thing that makes the meeting good is debate.
When there’s some conflict going, when people are like, “I don’t agree with you, you’re wrong on this,” but still based upon that trust, that’s when everybody puts their phones down and starts paying attention, because this is exciting. This is good. You want that debate and conflict going because you’re going to get a good decision on the other side.
A couple other thoughts on the things I’m doing differently. First of all, fundraising strategy. In less than 18 months, I raised $32 million at Engagio, which is almost as much as Marketo raised in four and a half years. You would think, “Wow, that’s amazing that you raised all that money.”
The problem, though, is in order to not get diluted to hell, we raised that money at fairly high valuations, which is a nice thing you can do as a second time founder, but that big money, eventually, I’m going to need to raise money based on real metrics. Not just based on the fact that I’m being a second timer.
I need to make sure that the money lasts just as long. I need to get just as far in terms of ARR, and growth, and other operational metrics on the same amount of dollars. It’s not like it’s any better to have more money. It actually means you have to have that operational discipline in order to make sure you’re still achieving the same milestones you need for the same amount of dollars.
We’ve been pretty efficient. Actually, my first raise was $10 million. We’re still spending that. We actually haven’t even started to touch the second $22 million. Right now, we have cash through the middle of 2019. It’s good to have lots of money, but you still have to have the operational efficiency.
The benefits to us of this strategy are less dilution, less risk. The world could blow up, who knows what’s going to happen. The fact that we do have a big bank account gives us strategic flexibility, and lastly, less distraction. I’m going to be able to go for two and a half years without thinking about fundraising. That’s actually a really nice thing for driving the business.
Another thing that I have as a second timer is a roadmap. Back in the days at Marketo, we didn’t know how fast should we grow, or how should the quota for a sales rep be, or what the gross margin should look like.
Fast forward to today, there’s lots of great resources out there, SaaStr included, that tell us how we should grow, what should we do and the ability to rely on that to drive our growth. Like for example, mapping to the battery triple, triple, double, double, double is a really important way for us to know that we’re on track.
Another thing I’m doing differently is in how I’m thinking about the market. This market map is something I put together to just really help to understand who all the players are in my category with these different sub pieces to it. The reality is, in Marketo, it was a hypercompetitive world. It was ugly at Marketo with our competition, especially with Eloqua going at it, if you will, both in the field, in marketing.
I’m doing it very differently here. We are taking partnerships with almost every company on this map if possible for the goal of building the category together, which has been great. That’s why account based everything has taken off so quickly because you have companies collaborating around it. Frankly, it’s just nicer. There’s no reason to be nasty out there.
A little tactically, and then we’ll get to the discussion. I am focusing on bigger deals my second time. At Marketo, we started fairly SMB, small deals, 12k. That’s a tough business. You usually have one user, they leave, there’s nobody left to use the product. They churn. They take just as long to get up and running. They have more questions. There’s less expertise.
We’re really trying to focus higher. My goal is a 40k average contract value where regularly you’re doing six figure deals. We’re getting up there. We’re currently at 26k ACV. That’s just a better, healthier place to be.
Part of that is building our enterprise muscle earlier. We’re not a full enterprise company right now, but I know we want to be there. That’s a hard muscle to build if you wait too late. We’re trying to build that as early as possible.
Then, lastly, as I said earlier, we are drinking our own champagne on driving outbound sales. Again, at Marketo, it was really hard when we tried to layer that on after six years of sales reps just being fed inbound leads. Trying to be balanced at the beginning with both marketing but also driving that outbound, it’s an important muscle to build and also to make sure that you don’t create a culture where sales forgets how to do that.
If you may notice, that was actually only nine things we’re doing differently. We’ll hit the other number 10 and a few other points with the Q&A.
Doug: That’s great.
Jon: That good?
Doug: That’s wonderful. Thanks, Jon. Great insights.
Doug: That’s great, Jon. I want to focus on some operational aspects, but I also want to get a little bit more personal with Jon and just hear a little bit more what it’s like from a personal perspective as an executive being not only a second time founder but a first time CEO.
First question, Jon, obviously, you’ve been very successful with Marketo. That was wonderful.
Jon: Thank you.
Doug: When you were building Marketo, you hadn’t had that yet. Now that you have that success under your belt, how are your goals different at Engagio? Are you operating differently going for the bigger win or taking more risks? How are you thinking about that?
Jon: I don’t think the most successful entrepreneurs are ever just financially driven. I certainly haven’t been. For me, most of my career has been driven by a vision that I have of pursuing the one to one future, just making marketing and sales more intelligent, more meaningful through data and analytics.
That was true of what I was trying to do with Marketo. It’s true of what I’m trying to do with Epiphany before that. It’s definitely true with what I’m trying to do with Engagio. That goal of just I want to build that product is really what drives me more than anything else.
Obviously, there’s some personal stuff there, too. I’m seen out there as a very good marketer, I want to prove that I’m actually a good CEO, too. It could be, maybe Marketo was just a fluke. Obviously, if you can do it two times as a success, then that’s a line as opposed to a data point.
In terms of the financial stuff, I don’t want sound snobby about it, but once you’ve had some success, a few million dollars doesn’t make a difference. Just as you can see in our fundraising strategy, I have priced ourselves out of any kind of quick flip. Almost by definition, we’re going for something big.
Doug: For you as a second time founder that’s been very successful, is there any increase in pressure because you’ve been successful? Are there higher expectations? Do people expect you to know everything? Does it feel ever like there’s a greater weight on your shoulders?
Jon: It’s way better to be second time than not. Let’s just be clear. It’s great for fundraising, it’s great for building our market presence and awareness. I don’t get a ton of pressure externally, but I get a little bit from myself.
Partly, there is that kind of, “Oh, gosh, what if this thing doesn’t work out?” The fear of failure, particularly because I mean it’s a drug, you get addicted to it. If this thing doesn’t work out, and then I got to just go become CMO at some company after this, that’s going to suck. There is that my personal thing.
The other thing that it is different as CEO as opposed to not the CEO is I have more doubt. At Marketo, I had a lot of confidence and trust in Phil. He was an amazing CEO. That trust in Phil, it felt like, “OK, it’s going to be all right.” Phil knows what he’s doing and he’ll guide us to success, which he did.
Here at Engagio, it’s me. That doubt that you always hear CEOs have is there, of course, because there is nowhere else for that to go.
I will say one of my strengths and weaknesses is that I am a pretty confident person. I’ve always had that a lot of self confidence. It turns out that’s probably one of the most important things you need to have as a founding CEO, because that doubt is there all the time. If you’re not confident, it’s just going to chew you apart.
Doug: I can’t see anybody, but I suspect there’s a lot of…I was going to ask for a show of hands, but I suspect there’s a lot of aspiring CEOs in the room who are not CEOs today, and that’s where you were at Marketo.
What advice would you give for people in the room that would like to be a CEO someday that are not today? What should they be learning today in their current role to put themselves in a position to become a CEO? What do you wish you had even learned more of at Marketo?
Jon: On the skills side, the two things you always hear is product skills and sales skills. On the margin as a founding CEO, the product skills are really important just because at the end the day, if you’re a technologist or if you’re on the business side, you got to be able to figure out a product that’s going to have product market fit. Anything you can do there is important.
I didn’t have any sales skills before doing this, or I had never done sales before. As the CEO, you’re just always going to be a good salesperson even if you don’t actually have any formal sales training. That’s one.
Number two is, everybody here is already doing this. Learn everything you can about SaaS companies. Just those ratios and those metrics and how they work and how they grow. Assuming you want to start a SaaS company, learn that.
Then, the third, I think the most important, is start thinking about your team now, long before you’ve ever started. When I left Marketo, I left on very friendly terms and I didn’t go hire a whole bunch of people out of Marketo, but I did have my wish list of the four people I was like, “Oh, I would love to have those people come join Engagio at the right time.”
Over the last two years, I’ve managed to actually bring those four people over. It’s great because it’s so hard. Building your team is probably one of the hardest things as an executive. If you can have those people identified and nurture those relationships along the way, it makes everything a lot easier.
Doug: He alluded to this with the picture of his kids, but when he founded Marketo and I invested, we didn’t have kids yet. We were just having kids. Now, we’ve got kids and you’ve got two kids and, obviously, all the busy life that comes along with that. How are you managing work life balance the second time around? Is it different?
Jon: One of my theories is always that people are going to work…people have a set point for how hard they work. I do have my envelope of how much I work and don’t work. My co-founder at Engagio also has kids.
We don’t have a culture of people working till eight or nine o’clock at night, but we have a work culture of when you’re in the office, you work intensely which is what you tend to see from parents, especially parents with young kids.
I wish I had more time to work out, I’m trying. That’s not as much from being an entrepreneur, that’s from being a parent. It’s really hard to do both at the same time. I do take PTO, that’s the other thing that is probably even more helps.
When you have family, you go on trips, longer trips than I ever did when I wasn’t a parent. I’ve had to find ways to be able to actually take time out of the office and keep things going. By the way, that’s role modeling something nice for the company that I do want people to be able to take breaks and then come back.
Doug: Got it. You mentioned fundraising. Obviously, a very different strategy this time. Part of that’s your success, part of that’s the environment. You didn’t talk about choosing investors, constructing a board. You’ve done that two different times now with some overlap, but some new investors. What advice would you give to folks in the room about constructing a board and an investor base?
Jon: As you know, I wish we’re able to work with you this time. I’m glad you’re a personal investor, but we haven’t been able to make it work formally. The most important thing is trust. That’s again mom and apple pie to say.
I had the luxury of being able to look at a lot of different firms, especially across my rounds. Inevitably, what I chose each time is people I know and trust, even if it’s not the best terms, the best valuation, because the reality is these are the people besides my wife who are going to have the biggest impact on my happiness over the next few years. I really wanted to know I had people I trust.
In terms of board composition, I’m not super like, “Oh, I need something exactly like this,” but I tend to think about four roles of what I want from my board members. There’s the strategist who’s going to help really guide me on the big issues and make me think about things that I’m not going to think about.
There’s the operator who has been there, done it, knows, “OK, you should do this, you should do this, have you considered this” kind of technical. There is the networker, the person who just knows everybody, and can make introductions, and get us into accounts, and help me hire, and all that kind of thing.
Then there’s, I guess, what I would call the fundraising specialist. You know, somebody who just knows the investment industry really well, and can kind of guide on fundraising strategy and tactics and things like that.
Obviously, some investors like you can fill more than one of those categories, but I do try to think about, all right, how do I get all those different pieces filled?
Doug: That’s great. I think we’re just about out of time. Jon, thank you.
Jon: Thank you.
Doug: Congratulations on everything you’re doing. Good luck at Engagio, and a round of applause for Jon.
Jon: Thank you, Doug.
(Cross-posted @ SaaStr)