WP Engine Revenue, Valuation & Funding (2024)

[00:00] Quick context. This was recorded March twenty eighth and twenty ninth. So a couple weeks ago at my live event, saasopen.com. We had a thousand software CEOs there. If you missed it, we hope to see at the next one, September fifth and sixth in New York City, saasopen.com. But for now, let's jump into the recording. [00:18] >> We got to a 100,000,000 in a little less than seven years, and we hired a CEO, and it was the second best decision I've ever made. [00:28] Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software [00:54] founders. So far, we've invested in over 400 software founders totaling a $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer. Alright. Let's jump into the interview. [01:14] >> All right, my name is Jason. I started WP Engine fourteen years ago. We have hundreds of millions in ARR. I'm gonna share with you some lessons that I learned along the way in doing that. You probably know me online though as a smart bear, hence that. So we got to 1,000,000 ARR in our first eighteen months, which is pretty good. I thought maybe already the company could just grow like that. But then in 2012, our growth [01:39] >> rate shot up again. We went from 1,000,000 to 5,000,000 in one year. And as you can see, it never ended. We got to a 100,000,000 in something like a little less than seven years. And this little flat part at the beginning, that was that previous chart. Right? Just to give you a sense of scale of what happens. And so I wanna take twenty minutes and talk about stuff that I learned from this part where the company [01:59] >> is growing faster than people can grow. So the first thing is that you know it's gonna be different, but it it's dramatically more different, I think, than you expect if you have never done this before. Because before product market fit, you're exploring. You're trying to figure out, yeah, everyone here knows this. Who's the customer, and how do we get there, and what's our unique thing, and blah blah blah. So this is all experimentation and unknown stuff. [02:24] >> So there's all these techniques you should use, like trying crap and pivoting fast and nonsense like that. But after you have product market fit, you know those things. And so the things that you do dramatically change. And so just saying things like, we'll keep experimenting is not how you scale something that's already working. So for example, you're not just building stuff. You're hiring and managing humans quite different from finding a marketing channel or building software. You [02:51] >> have something to lose. Like, there's growth. There's customers. So defending that becomes a a whole thing to do that you didn't you you not only shouldn't didn't do before, but you shouldn't have. There was nothing to nothing to to do. You built a kind of a crappy product because, of course. So now it's time to fix it, which you you again, you didn't do before nor should you have, but now it's time. That's different. Again, different [03:15] >> mindset. Before, if you had a bug that affected 1% of your customers, that might be zero or one people, so whatever. But now you have a bug that affects 1% of the customers. You get 30 support tickets in a day, and now everyone's behind, and you get 30 negative tweets, and that's really bad. So that means the rare things, which are now common, you have to do something about, and it's hard to detect and deal with [03:38] >> rare things just in general. Totally different processes and mindset. Right? Also, if you're, let's say, doubling in a year, what's what does that mean in terms of how many people you need, let's say, in support? And how long does it take you to find an interview and hire and get people up to speed and support, especially since you have no processes and documentation because you're new? So what does that mean? I don't know. It'll take, like, [04:03] >> six, nine months. Okay. So you need to know how many people you need in six or nine months. That means your business has to be more predictable, another new thing that didn't exist before. So there's this stupid phrase. It's not stupid. It's a tired phrase. What got you here? You know? Right? In this case, it really is apt. The stuff, the activity that got you here won't get you there because there's these other types of behavior [04:25] >> which are now correct, and it's a lot of stuff. And I guess the point I really wanna make is that this changes who you are and what you are even proud of because you were proud of that you experiment and you're and you're like, that's why we're different. That's why we're better. And big companies are stupid, we're smart. And here you are having to change that. That is the difficult, not only from a skill set point [04:48] >> of view, but from an emotional point of view that is difficult. And I think we don't appreciate how hard that is enough. So that's the first thing, this this fundamental difference. Okay. Another obvious thing that happens with scales. Now there's a bunch of people. We all know that's going to be hard. There's no way that's good. So fun question. [05:05] I have a lot of people. [05:06] >> So we go faster? You already know. Well, okay, let's say I have 30 people and some competitor has three people, so we should go 10 times faster. We have 10 times as many engineers. We may have 100 times as many customers. We can learn more about customers. That part's true. Right? And we all know this is not true. We'll go faster, but not like that much faster. So there's no silver bullet to fix this as you [05:27] >> probably know, but there are things to do to be more effective in leveraging the scale, which now should be an advantage of yours that you have extra people on time should be. But, of course, it gets it gets pulled down. So what can we do to take more advantage of that? So observation is when you add people, you tend to add more stuff you can do. We just heard that in the last talk. At first, you're [05:49] >> just making features and trying to sell it, of course. But then you start hiring people and maybe you expand the market or do other fun things. More people, more stuff. Makes sense. Maybe creative stuff like micro projects. You created a YouTube channel. Hooray. YouTube is fun. Everyone goes up market to the enterprise. Right? That that's what we all do because they have money, don't they? They do. Anyway, so this is what people do. And what I'm [06:13] >> gonna argue is that this is not what you should do, that you should instead still have only a couple of things that you do and focus everybody, all the scale that you have on just a few things instead of this. And the reason is that if you cut up everybody into all these different initiatives, then each initiative is not at scale. Doesn't have that many people, doesn't have that many resources in terms of things like money, [06:37] >> and so isn't very good. So you've taken what should have been this advantage of people and diluted it. So if you have a YouTube channel and you have two people working on it and some little startup is good at YouTube and also has two people on it, you're not better at them than at YouTube. So that's not so good. Whereas if you put 10 people on that and lots of investment, maybe you could dominate YouTube in [06:56] >> your area. That actually sounds pretty good. So instead of splitting it up, you you want to not dilute your scale across a bunch of projects, but still have just a few things. That way you're using your leverage to win. Now, of course, this begs the question, if I'm only gonna do a few things, what do I pick? How do I pick just a few things since I have so many options? Here's what I actually do with [07:19] >> teams at WP Engine and sometimes groups of teams at WP Engine. The first thing is we sit down, we do this once a quarter, And we say, okay. If we weren't encumbered by problems, challenges, constraints, how would we advance our strategy right now? So, like, could be anything. Maybe there's a feature you know, we all know would be great because customers talk about it. We've invented it. Competitors don't have it. We know it's good. Like, it'd [07:45] >> be so strategic. It's how we're going to win, you guys. So maybe it's that. Or if there could be this is just some ideas. Right? There could be all kinds of things. It's time to open a new sales channel. Whatever would be the best way for you to win now. This is obviously something where you can brainstorm lots of things and then come together on a few things. Right? And it's it's good to get as many [08:03] >> people in the room for that kind of brainstorming as possible because it means everyone's contributing to the answer, which ultimately means there would be more on board with the final answer. Okay. I know objectives is a crappy word, so pick a different one. Anyway, so but then what's stopping us from doing that? By the way, this is not revelation. Right? Duh. Like, have goals and then what's that? This is not like but going through this, I'm [08:24] >> telling you is is is a great. So again, there could be anything. Yeah. We'd love to do that except our churn rate is 5% per month. People are just fleeing. And not only is that bad from a financial point of view, it means the customers don't want our crap. That's probably more important than opening up a new geography that they don't want it. Oops. I'm gonna fix that. So okay. So there's there's could be all kinds [08:44] >> of things. We lost a key person, and so some team is screwed. They need to go work on that first. Okay. So it could be all kinds of things. And once again, where are they? Let's find the top couple of things that are holding us back the most from doing the first things. This is okay. Then finally, of course, what are we gonna do? And this takes creativity. There's no magic answer to this. At least we [09:02] >> know what we're to get to here. And for the obstacles, we're either trying to attack it or we're trying to avoid or we're we're having to solve the first thing by avoiding it. For example, let's say one of the obstacles is we don't have enough money. Well, attacking it would be like, so we're gonna raise money. So we're gonna get debt from, I don't know, Nathan. So we're going to do customer based financing by charging an [09:27] >> annual fee and getting people to switch to annual, and the customers will fund us. Lots of ways to that you could solve that obstacle of not enough money, or you could work around it. You could say, [09:41] >> okay. Look. It's a constraint. We don't have that much money. So we're gonna have to get creative about how we make some progress, maybe not all of the progress we want, but some on those top ones without money that just becomes an enabling constraint. That's another way to do it. So anyway, as simple as simplistic as this might sound, it's a very easy narrative. Remember everyone, because of our strategy, we wanna do this, but this is [10:00] >> happening. And so here's what we're gonna do. Like, it's such a simple story. And so if you do this every quarter and it takes no longer than a page to say it, everyone knows at a [10:08] high level exactly what to do. [10:09] >> So again, I do this on the team level, you and can even do this on a on a larger level at the and then I I think doing it more often than this is not necessary. It's a lot of overhead. But about every 100 days, this kind of stuff falls out of people's heads. Just like if you're a distributed team, about every 100 days, all the social fabric starts getting weaker and you gotta come together to [10:29] >> recharge those batteries, same kind of thing. Right? This helps you identify what that is and gets everyone aligned to it. The final thing about focusing everyone is if the whole company is working on just a few things, that means projects will cross over teams and that's another problem. Right? And you know, you already know what this problem is. People have to talk and that's meetings and all this crap. And then marketing says, I think we should [10:51] >> redo the design of the product to match the website. They're not wrong. And the engineers are like, we have to refactor the code because that's what engineers always wanna do. Did you write that code? Yeah. But we gotta refactor it. Okay. Whatever. They're probably right also. And then they if they can't resolve it, which often is the case, it moves around. I mean, meetings and the CEOs deciding, and this is, of course, a huge not only [11:10] >> is it inefficient, not only is this, again, diluting our power of scale, it also sucks. It's also bad for morale. And, I mean, who wants who wants to live like this? So there's two kind of main ways to deal with this. One is called matrix, which means somebody runs the project and tells everyone across the different teams what to do. What are the priorities? What are the metrics, etcetera? And critically, the direct managers or the CEO [11:36] >> does not tell them what to do. So the good news is this is better for people's careers. Because if I'm a designer, for example, I wanna sit on a team with other designers who are working together and knocking stuff around. I want a manager that helps me become a better designer. That's what I need for my career. This preserves that. Hooray. But it's obviously complicated to have, like, the org chart structure. And and then what does [11:59] >> my manager do? And what does this other so, obviously, it makes this complexity. So that's a penalty. It's true. The other way is kind of the making the the other decision. Right? Okay. This place in the org chart, that's an initiative, and everyone under there is who we need to get it done. Good? Simpler? Bad for the designer case. So, okay, there's no free lunch. You pick the one that matches your culture and that you think [12:22] >> you can execute better, where you're more comfortable with whatever those downsides are. But the bottom line is the org chart somehow needs to reflect this focus so that you don't get bogged down again in crap. So that's some ideas of how to handle the many people problem. Another people problem though, for the final thing, of course, because it's all people problems really. I mean, there's technical problems too. We host millions of websites and have tens of [12:45] >> billions of events per day flying around. We have infrastructure scale problems too, or challenges, I should say, But it's usually people. And the big thing here I wanna emphasize is that when you hire managers or even executives who are people that building entire departments, you might say building teams, that's completely different than what you've been hiring for. And let me start with the manager. So everything so you you have especially when you're small, you usually have, [13:09] >> like, the hero developer and that person that does a 100 tickets a day. But the problem is that if they leave or they have a baby or whatever, then that grinds to a halt. And, course, at scale, we can't have that. We have to be able we have to anything that's important must be a team so that when there's some issue there, you the company proceeds. Right? And that means you have to have managers. And if [13:29] >> you think about it, this is gonna be a very different skill set. But engineers in particular don't understand this. If you ask an engineer, what is a good engineering manager? The first thing they say is they have to be great at writing code. They basically describe an architect or something. Right? And they're completely wrong. Now it's not true that a non technical person should be an engineering manager. Of course, they need to speak the language. Of [13:50] >> course. But their job is not to be the best engineer. Hopefully you have that already. Their job is to build the team and to work on conflicts and to figure out these priorities and to work with other teams and so on. And so it's it's especially engineers, they they don't interview for this ever. If you ask an engineer when they interview their manager, what they ask, they never ask this stuff. It's always like coding questions. Right? [14:11] >> They don't get it. You may not get it either. If you're a founder and you're not used to this and you're not used to have it, you know, building teams. So this is something where you have to change your mindset, so do others. The more interesting problem though or puzzle is is managers of managers or or executives because, again, the things change a bit. And in particular, especially as the as a c level person or founder, [14:32] >> everyone you hire has to be better than you. Or else the company is not progressing. And certainly, you're again, if you're scaling fast, you're gonna out scale how anyone can grow. You have to get that talent. That means that person has to be better than you. But how do you do that? Like how do I hire a pancreatic surgeon? I don't know. Right. So interestingly, as a leader, you have this puzzle always of having to hire [14:58] >> the pancreatic surgeon. So again, no silver bullet, but here's some tips you can use, especially in interviewing to try to suss this out, even though you're not the expert. First of all, when you get off the call with them, you should be giddy with like, oh my god, they said they would do this and they've done that. Like, even if we don't hire them, like we've got to do some of these things, guys. Like, I took [15:18] >> notes like crazy. We gotta do this. If that's your feeling, you literally have notes you wanna go do. That's a good sign. Now, of course, since you're not a pancreatic surgeon, you don't really know if you're right about that. Maybe they weren't such good ideas. You don't know that. But the fact that you're excited and wanna do it means it is a culture fit and a skill fit and a process fit for your company. That's good. [15:40] >> That's a good step. So it's more likely to work because as long as they're not completely dumb ideas, which are probably not, this is more likely to work at your company. So that's actually pretty good. Another question you can ask yourself is, do I think this person's gonna uplevel all of us? Like, not just the people on their team, but their peers because they've seen this or done this or who knows why. You can even ask [16:01] >> questions about that. So maybe they're good at metrics and no one's good at metrics. And so although they're in support, they're gonna help everybody more or less. Good sign that it's gonna make everyone better. Another signal of a executive as opposed to say a manager. We don't expect the manager to up level the person next to them. An executive, that's exactly part of the job description. It's about us, the company, not just the department that you're [16:23] >> responsible for. This is my favorite one, which is background checks. I I I I don't mean whether they went to jail, although I guess that too. I mean, the, you know, references. And, of course, if you call the references and ask, how are they? They're gonna say they're great. So, of course, you don't do that. That's that's tells you nothing. What you do is you call and say, what is the perfect scenario where this person is [16:45] >> an absolute superstar that they're so happy and so effective and they just get 10 times more done than you would expect? What does that if you were to construct that for them, what would that be? Like, for example, some people say, tell me exactly what to do, and I will crush it, and they will. And there's other people that are like, if you tell me what to do, I will leave. Show me where we're going. I [17:06] >> want to figure that out, then I'm super happy. Who's right? Nobody. That's just different modes is all. So that's what that's what you're trying to suss out. What are the modes? Whether that's company culture or skill sets or what their team composition is like or whether they have to hire a team or fix a team or build something big. What is it that's that that makes them amazing? You're asking the other person. That's actually pretty easy. [17:28] >> It's actually easy to think of, oh, yeah. Yeah. If you do this, they're mad. And if you do this, they're great. Like, it's actually easy for people who know them to answer that. And then I ask the same question in the negative. Construct a scenario where you will crush their spirit. They'll be worse than neutral. They'll be destructive. You know? Again, it's easy. Oh my god. Yeah. If you try to tell them what to do every [17:46] >> day, they will just quit or or they will take it out on other people. You know? Oh, okay. You've never told them what your company's like. So this is a completely unbiased view of this because we're all like this. We all have scenarios where we'd be very happy and scenarios where we would not. So we're all like this. You're just trying to find out what it is. So then, of course, you're gonna take that and think [18:07] >> about the slot in your company, the culture your company has in the specific slot and conditions that they have that you're gonna be asking them to to do and just trying to think is that a fit? So once again, this is the way even though you don't know anything, you don't really know anything about their specialty, you can see if they're a fit. So that's how I do it. That's actually literally what I do. The final [18:28] >> thing I'll say about the executive level is it's nice to have somebody who's done it before. Some sometimes people are like, you got to stack the executive team with people who've done it before. Maybe that could be a good idea. It could be. But there's a really big difference between zero people who have done it before and one. And so it can be any role at WP Engine. It was actually the CEO. I became the CTO [18:49] >> and we hired a CEO, and it was the best the second best decision I've ever made. You can you wanna guess what my first best decision ever? Myself. No. My wife. My wife was the first best decision ever. We've married over twenty years, by the way. Anyway, my second best decision, though, was hiring Heather Bruner to be our CEO. She's been here for over eleven years now and fantastic. But it doesn't I mean, I I've seen [19:12] >> other companies where it was the COO or the CFO often in some kind of operational role where this human scale is part of the challenge and then they tackle it. That just makes sense. Right? And they bring these practices, things they've seen good and bad to the conversation as you're solving all the conversations at the company, and that's really valuable. So again, lots of times, I've seen, for example, you have your CEO founder and your your, [19:36] >> like, your, you know, product or engineering cofounder, and then maybe the CFO or COO is that person. And it's this beautiful trinity. And in fact, that's what happened at Google too. Right? Like, that kind of a thing, regardless of the titles, that really is quite smart at the scaling phase. Why not import that information? So that's what we've got. The the the the it's really, really extra different after product market fit and scaling sets in. Not [19:59] >> a little bit different, more than you think. It's a big mindset shift. [20:04] You have a lot of people. [20:05] >> You don't wanna have to court coordinate them very much, and you don't wanna dilute them. So don't split them up too much. Decide what it is you're gonna do, what's strategic, what's stopping you. So here's what we're gonna do, and get everyone in the company aligned on those few things even though you have a lot of people so you can crush those things, you know, because you have so many people to to crush them with. And [20:23] >> then the org chart is hard. No matter what, it's hard, but be mind be intentional, let's say, of how that maps to the org chart. And then finally, with executives, managers are not just good ICs. They are a different thing to build people than to build products. And then with executives, you can use these little tricks, I guess, or tools, I suppose, to try to hire people better than you because that's the only way the company [20:44] >> is gonna be good enough. And then you'll be able to scale really well. [20:52] >> Cheers. [21:01] >> I'm expecting to be saved by somebody, but there's no somebody. That's okay. I don't care. Yeah. Let's take questions. Why not? [21:09] Jason. A few question for you. On an annualized basis, how do you think about yourself from an evolution standpoint? Right? Like, how do you [21:17] >> measure Oh, so the question is how do I change as we've grown personally? [21:20] Every every year, how do you measure yourself from your your own evolution? [21:24] >> Oh, personally? Yes. So the question is how do I measure myself personally as I evolve or don't as we scale? Because that's the truth. There's some ways which I have and some ways I have not. I just know like, well, that's a weakness. And so I should just not be in these positions or not for long, you know? I think a three sixty is a is a is again another big business answer, but man, is it [21:44] >> good to get anonymous feedback from people that that report to you and peers and and then have someone that knows what they're doing to process that into something where you can't tell who said what, which I guess now could be AI. I think what's good about AI in those things is it does summarize okay, but it leaves out detail that might be the whole story. Like, the details where you really understand. If you just say stuff [22:05] >> like, you need to listen more. You're like, okay. I get. But when you hear the these details, now you sort of go, oh, I did that, and that's that did that to the other person. Oh, right? And and AI tends to throw that away. So I'm not sure about AI. But $3.60 is is a kind of a big business y thing as that sounds. I found that to be quite quite illuminating. And some of that is, [22:25] >> oh, I'm doing this wrong. Okay. But, actually, also, I didn't realize what I was really good at. People very consistently said, like, I get people excited about the vision of the company, and I didn't even consider that, like, at all. So I was like, oh, well, I should then I should do that more, and I didn't even I didn't even know that. So it's not just about what to fix, but about what are these strengths that [22:44] >> you wanna lean into even more. You learn that as well. I don't know what we're doing in the timeline, but I'm happy to do whatever if anyone has another question or not. I don't care. I know there's not another speaker because it's food. So it's okay if you wanna leave also. I won't be offended. Yeah. [23:01] Tell us a bit more about the quarterly that you do. Is it like a [23:04] prose or is it [23:05] >> like bullet points? Is that [23:06] action points? Like, what's in that quarterly document? [23:08] >> So the question is what's in the quarterly document? The result is, yeah, just a literally a word a Google Doc with bullets. Just text. Like, some some people like to do things like link to Jira epics and stuff and, like, connect it all. That's cool if you're into that. But to me, that's not even important if you don't because, you know, it it could just be that. Now in the process of making it, the first time [23:30] >> you do it, it's messy because you're you're asking these questions for the first time. A lot of people like to use Miro to, like, brainstorm and everyone doing that at once, and then maybe you cluster it in certain things. What's more important than others? Or, you know, there's different kind of standard ways of doing that. But subsequent times, it becomes really fast. Like, we I we just did one with our corporate data team, and it took [23:50] >> two days. I think the first time it took three weeks. Right? Because we're like, look. Most of this is the same as last quarter. A little bit changed, a little bit of that. Nothing new has cropped up here. So it's just like tweak, tweak, tweak. We're good. So it took almost no time, and yet we're a 100% aligned, and so is the rest of the company about what they're doing and why. Another good reason just to [24:08] >> throw it out there is when somebody is, I'm a oh, I have the top priority thing I have to have. You're like, well, here's our priorities. Is it really? And all of a sudden, it's not. And, you know, or if it is, again, we have a narrative to to to to, like, understand that. So so so so it it can get really fast and efficient. [24:29] How did you realize that [24:31] you needed a CEO? [24:32] And second follow-up is when trying to recruit or interview a CEO, what were the most important aspects to determine that you're making the right decision? [24:43] >> Oof. Good questions. The first one is how did I know and they come to the decision to hire a CEO. And the second one is how do you interview for that? How do you what are you looking for? [24:53] >> I have I did a whole talk at a different conference on this topic, and I have an article not to, like, push everything, but on on my I've been writing for a long time at the smartbear.com. And you can read, I show you exactly what I do. But the bottom line is, like a lot of these things of what makes you fulfilled, these kind of thoughts about that, they're very similar. Dan Pink with the mastery autonomy [25:17] >> and purpose. There's Ikigai, right, which is like four things. I had a way that I did it. [25:24] >> And it's that when you do stuff that you love mostly and stuff that you're good at and that the company needs done, then you're in a good place. Again, not revelation. But what I was able to see with this simple thing is, oh, the company needs various things that save seventy, eighty people that we were and growing fast. We need to hire an executive team that can manage this stuff, a global sales team, for example. We [25:49] >> need we're gonna be raising more money, and that that's a whole thing. We're gonna have a more serious board. And we we we it's we we want the CEO to we have a culture we're trying to maintain. What does that mean at scale? That's a whole another difficult topic. Right? So these are some of the things needed. And for me, was like, these things are either things I'm not skilled at or don't like or both. So [26:10] >> it's one thing if you aren't skilled at it, but you like it, then maybe maybe it's maybe it's a a growth path. But if you don't even like it, you're just gonna hate it and not do a good job. And we just said the company hated it. So, like, what's what's happening here? The thing that finally so that was the intellectual part. That took, like, three months. What got me over to the line emotionally was I [26:27] >> was sitting in a wine bar with one of our early investors who himself was a founder. He had taken a company public, blah blah blah. So he understood. Right? And he goes, Jason, I know what you're thinking. Because I was like, I know we should do this, but I yeah. Yeah. And goes, I know what you're thinking. You're thinking, one day you're gonna ring the bell on the Nasdaq, and you want the credit. [26:49] >> And I was like, look. I know there's mean, at the time, there was hundreds. Now there's thousands of people at the company. I know it's not just me. I know I didn't do it, but, yeah, you're right. Right? It's ego. Like, purely yes. Of course. I wanna go here's what he says. Here's the thing. You're the founder. You'll always get the credit. [27:06] >>...