Going Long: The 20-year Journey of Being a CEO + Founder with BlackLine | SaaStr Software Community

I think there's a couple of ways to know. You know, when you have an honest self-assessment, you can say, 'I'm a little tired. I have been going full board, 200%, for a very long time, and I'm a little tired.' When you also recognize that you don't really have the right skill set to take the company through its next phase. We believe that BlackLine can have a billion in revenue; our market's that big. I'm not a person who has scaled a SaaS company before, yes. And then, most importantly, it's when you find the right person. I hired Mark Huffman almost three years ago, and he and I have worked together very closely during this past several years, and I'm completely convinced that he's the right person. But having the right skills and having the values that don't mess up the cultural DNA of the company is critically important when you think about when is it time to hand over that mantle to someone else.

Oh, fourth time? I would say more like 20th time. 20th, right? I mean, you know, in the early days, you hit the wall a lot more often. I can remember going on walks with my husband and saying, 'I just don't think I can keep doing this.' And he would say, 'I think you're almost there. Just give it a few more months.' So having someone who encourages you, especially if you have great mentors, those are super invaluable. Just people that can encourage, but also they have the wisdom of having done it. That's a big, big deal, just to keep you going. 'Okay, this is not all for naught. I'm not gonna be homeless when I'm 45,' right? I mean, that's kind of a — you know, like, 'All right, I can keep doing this as long as it's got somewhere, it's going somewhere.' So the encouragement piece is big.

You know, it's interesting because there's not a lot of women in technology. All of my mentors are kind of — God bless them, I hope they don't mind me saying this — middle-aged white guys, okay? And who had been very successful in business on their own, who were measured, they're wise, they're honest, right? I mean, I have one particular board member who is still my mentor, and he — you know, when we brought on private equity in '13 — oh, '13, sorry — he would absolutely say to me, when I would get all wound around the axle, like, 'Look, they're being very reasonable. This is how private equity operates. Stop essentially being so hysterical.' And because I trusted him, that allowed my relationship with the private equity people to be really healthy, right? I mean, you know, and other times he would say, 'No, you're right. Stick your guns.' And I'd be like, 'Okay, I'm digging in, you know, because I think this is the right thing.' So having that wise view, because so often we get down in the weeds, right? And we can't really — and I don't know about other people, I'll get emotionally attached to a certain outcome or a certain approach. And to really have somebody just say, 'You know what? You need to set that aside for the benefit of the company.' And having that person be someone you trust is phenomenal.

Incredibly high value. And I cannot underemphasize how great it is when you do have a really healthy relationship with your investors. I mean, our private equity groups that were involved with BlackLine, they added tremendous value. I mean, just they helped me scale, they helped me grow, they helped the company grow. They earned their money. Maybe not quite as much as they made, but they earned a lot.

Well, one of the things that I did in the whole process was I decided that I was going to be extraordinarily transparent about what I thought was good about the company and what I thought were its challenges. So, you know, many times people are trying to put lipstick on a pig, right? They're trying to cover up everything that might be bad and just present perfection. I knew from the beginning that I wanted to have a very clear understanding on what was going to happen right after the documents signed. And so in order to do that, I showed all the warts. I highlighted the problems. I had in-depth discussions about the problems. Now, we had 14 bidders for BlackLine.

Yeah, we had 14 offers, sealed offers. And so it was a real process. And I did not have that level of conversations with all of them, but there were several that — you know, immediately they had done their due diligence, they understood the business, they had called customers. I mean, there were a few out of those where I had those in-depth conversations. And it was sort of like, you know, carrying it down to — you know, you're only going to date three guys until you figure out which one you want to marry. So, yeah, it was a little bit of a bachelor thing. But once we did that and really spent a lot of time with those just several, it was a really good process. And even the ones that I did not pick, I still have good relationships with today.

It never pays. Does it? It never pays. And most people hide it out of insecurity, right? So that is a failing in and of itself, because if I can go to you and say, 'I have this great business, we have a huge market in front of us, and by the way, we really stink in these four areas. Can you help us?' We're gonna — you're gonna respect that. You're going to teach me what you know and show me how to get through that, and we're all going to learn and be stronger as a result. But if you've got that insecurity like, 'I've got to look bigger, I've got to look better, I've gotta look perfect,' you're never gonna overcome those things.

Well, you know, if it was precisely every five years, it'd be so much easier, wouldn't it? But I'm with you. You know, I think about the one that really hit us was the 2008 financial crisis. We just decided at the end of 2007 that we were going to be SaaS only going forward, which actually turned out to be a great decision. But I would say there's a few things around this. Nimbleness is key. The ability to react and address customer needs and cut costs as you might have to. But that nimbleness — you can't just sit there paralyzed. You've got to be able to address it and deal with it. A cash buffer is going to reduce stress for hard times. Now, I've often said, you know, I don't think it's a great idea to go out and raise a bunch of money just for the sake of raising it if you don't have to, because you give up control, you give up ownership. But having a little extra cash in the bank is such a blessing in hard times. Because even at the scale that BlackLine's at now, with this pandemic, we saw customers take a lot longer to pay — period, just to pay, right? Just to pay. And I mean, completely understandable, everybody's focused on cash because we don't know what the macro environment is going to do. So having a cash buffer is really very helpful when you have one of these events. And then lastly, I would say look for opportunities. I mean, we saw a couple in this last pandemic. One was we saw an opportunity to build tremendous goodwill with our customers. We did customer relief, we did additional customer training, we gave away free products, we worked with people to do a better job of closing their books remotely. We had all kinds of ways of building goodwill with customers, and we viewed that as a very valuable outcome. And secondly, because we have a very healthy balance sheet, we viewed it as a tremendous opportunity to invest heavily in R&D, where many of our smaller competitors sort of pulled back, right? Because they were very worried about where the future was going. We said, 'Great, let's double down. Let's make sure that we get some great product development done. Let's increase our lead during this time,' because we have the resources to do that. So look for the opportunities in the black swan events. They're definitely there.

We actually have a world-class CFO, Mark Parton, and he did all the modeling ahead of time. I mean, he modeled all the different ways that we could do relief. And we didn't necessarily in every case do it without any benefit besides goodwill. So, for example, let's say that somebody was on a one-year contract and didn't want to handle a price increase or needed to drop something, and they would go back and go, 'Okay, great, let's make this a four-year contract in exchange for this.' Got it. So actually having a really savvy CFO to model what the impact is ahead of time to figure out if you can't afford it — if you can't afford it, it's not scary. But if you don't know, then yeah, it's scary. So we knew ahead of time going into this what we could offer, what we should offer, how much — about 25% of our customers are in impacted industries like travel and entertainment and others. So it is — our customers have had some real difficulties with this, and we want them to be customers for the next 15-20 years. So this is just a short-term trade-off for that longer term.

Oh my god, you know, during the financial crisis, as I mentioned a minute ago, we decided not to sell any more on-prem software. Now, the beautiful thing about on-prem software is you get a big chunk of money right up front, big chunk. And so we also had to forgo that. One of the decisions that we made at that time to help bridge that was we billed a year in advance for the SaaS subscription, and so that was a help with cash. But frankly, you know, the reason I say it will reduce stress in hard times to have a cash buffer is because I've had a lot of sleepless nights. I never had in the early days the buffer that I wanted, and I probably look 15 years younger right now if I hadn't had those hard days in the beginning.

Yeah, or another way: when we used to do sales forecast, I had a very wise board member who would say, 'Cut it in half and take it out twice as long.' That's conservative.

That's right. It's not a lifestyle decision. Exactly. You know, I love the fact that I retained an enormous ownership percentage of BlackLine to this day. To this day, I'm still the largest shareholder. Frankly, that would not have happened had I raised money much earlier. It wouldn't have happened, right? You would have — especially then, we've taken so much dilution, so much dilution, right? So I am not displeased with that. That level of stress is not for everyone, okay? I mean, it really isn't. Just being able to deal with that — here's the other thing, though: when people go to raise money, they put so much time and energy into the raising of the money. I mean, the books and the travel, and my God, I must have gone to, at one point, 200 offices along Sand Hill Road, right? I mean, sounds like everyone, right? I mean, and the amount of energy that went into that — you know, you should put that into building your business and making something that customers want to pay for. So it's not like you can do them both at the same time and get the same results. Nobody has that kind of bandwidth. So if you've got the opportunity, if you can — if you cannot take the money, wait as long as you can.

Wasn't that an interesting term that you just used: the mercenary hire? The mercenary. Okay, because that's not the guy that's going to be there when things do get tough, when you do need somebody to work on the weekends to fix a problem. And I would say we don't go after the mercenary hires. One of the benefits of being in Southern California is that there are fewer places for software engineers to work, but better weather. And I think that we've always focused on: we want our employees to be long-term employees. And so you provide the great pay, the great benefits, the stock options, the great culture, a growth path of how they're going to learn and grow and get better, and a career path. I mean, by being a great employer, you don't attract the mercenary hires. You attract the younger talent, and they stick around, and they grow, and they end up having enormous amounts of tribal knowledge that they can share with others. So that's been our approach. We've tried to stay away from the mercenary hires.

I don't know about that either. But after we did the private equity in 2013, at the end of '13, one of the first things that I was tasked with doing was hiring a whole executive team. Frankly, a CRO, a CMO, a CTO, a Chief Legal Officer, a CFO.

Not really. I had people filling those roles, but they were not — they sort of, you know, might have been the receptionist that I met at Starbucks, or the baristas. You were late to build out a traditional management team. Actually, you were very late, given scale, very late to build that.

Yeah. So we did, and having the private equity there really helped with being able to recruit that team. But what's super interesting even about that: now, I think they probably came for the options and the potential, and they've all done very well over time, which is great. I want them to. But what's really interesting is that even that team from four years ago, most of them are not here. For five years ago, and they're not because they're not there? No, yes. We've subsequently, in 2018, we essentially rebuilt the executive team again. And it's super interesting because the group that gets you to $25 million is not necessarily the group that gets you to $100. They got you to the four-year schedule, but then you needed a different set of skills to get to a billion and a hundred million, right?

You know, it would be very interesting because over the years, you can see when a particular area isn't functioning as it should. The laggard area. And so you have that conversation with the leader of that area. You say, 'Hey, you know, this doesn't seem to be working quite, you know, what are we going to do about that?' And to a person, I knew that we had outgrown the executive when the answer was 'do more of the same.' Didn't have the ideas. No, didn't have the ideas. Had sort of reached the end of their creative road. And, you know, 'Let's throw more bodies at it.' Well, wow, we did that last year, it didn't quite work. What are we going to do instead? And so that's across all areas. And I've often said to my board, 'How do we know that you have outgrown me?' I've said that many times over the years. 'Is it — am I a dinosaur here?' And one of the things that they always said was, 'You know, look, as long as you keep asking that question, then you're probably not.' I mean, you know, 'How do I continue to lead better? See a little further? Do something more creatively that will add value? How do I do those things?' So it's truly — you kind of know that you've outgrown someone when you know it's sort of like the definition of insanity: keep doing the same thing and expecting different results. And of course, you don't get different results.

Oh my goodness, as soon as you said that, Jason, I just flashed back to a couple of conversations where people were fearful. Fearful, like, 'I can't.' And it — the smell of fear, that's a great way to put it. I feel bad, and when I smell that, I want them to stay, they just need to be topped or be in a different role. It doesn't mean they're not great. Maybe they're a director, right? Or more junior VP. But that fear — I've never seen it cured. I've never seen that fear of the next year's number. You should have anxiety, but that's not fear. Anxiety is, 'I don't know if these five ideas will work, but I'm going to try them. They should work.'

You know, I always — I have never been a big fan of any rule, so I've never been good at following rules. So it's great to listen to everybody else, it's great to listen to this podcast and learn what you can, but at the end of the day, you've got to trust your own gut. You've got to believe in what you're trying to accomplish, and you've got to be all in on that. So it's great, like I said, it's great to spend your time listening to podcasts, but if you're not doing it while you're commuting, then you're not really focused on what you should be focused on. I mean, it's — you know, don't — and that goes along with the raising of the money which we already talked about: wait as long as you can, and then know that it's going to be an enormous distraction and take up a lot of time and energy, and that's going to hurt the business. So again, wait. You'll have more ownership, more control. Don't — you know, one of the things that's great about entrepreneurs in general is that they identify a need that is not being addressed commercially right now. And you will get many people that sort of pooh-pooh your idea in early days. We talked to — it's hard to hear that. But we would talk to VCs and they would be like, 'What is that? And who cares?' Right? And it would be like, 'No, no, this is really important to companies' financials.' And they'd be like, 'Yeah, no.' You know. So I think it's really important to hear what the experts have to say, but the reason you're an entrepreneur is because you have an idea about something that nobody else has actually developed, and you can't listen to their rules or their pooh-poohing if you ever want to get anywhere. In fact, if you do, you should just go get a paycheck somewhere. You probably should. It's easier. At the end of the day, the best job of all is to be the number two or number three. That's the best job of all. You get a lot of the benefits without the next level stress of the founder CEO, right? That's the smart play. You want to be the SVP or the CEO?

Nope. I think — well, I will say this: I think that actually having a successful enterprise is really the epitome of the American dream, right? To build something out of nothing and to build it into this vibrant enterprise that has employees that make livings and are joyful, and customers that are happy. That is about the most satisfying thing that you could possibly do. And that's true whether there's a pandemic or a black swan event or whatever. So, words of encouragement to the people that are really trying to do something hard: it's hard, but it's so wildly enriching when you get through it.

100 years. At least another 30, I would say. Another 30.

You know, I am optimistic. I am probably more optimistic about the younger generation. I see millennials have a lot of angst, which is difficult. The Gen Z's — they've also lived through some incredibly difficult times, right? I mean, if you think about millennials, they've had 9/11, they've had the financial crisis, they've had the pandemic. I mean, life is difficult. Gen Z'ers tend to be super fierce. They're not more optimistic, they're just fierce about what they're going to accomplish. And that gives me great optimism.

Right. We'll — it may not even be SaaS. We don't know. We'll find out.