Databricks pivoted from PLG to enterprise sales and paid innovation

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 38:57

   was one of them as well. But can you talk through what those three were? I think it was up-leveling the management team, sort of changing the focus of the customer type and then monetization. Yeah. Enterprise sales, total pivot into enterprise B2B. We were PLG. I know it's still hot. Everybody wants to build PLG companies. But we learned a hard way after two, three years that PLG doesn't really work.

2. 39:18

   Might work for very few companies. It's a great thing. We still do PLG. But if you, guess what? If you want to sell a data platform where you want to manage the most sensitive data of a large organization, you need to get the buy-in of that organization. Nobody's going to just swipe a credit card and start giving their data to you and you're going to succeed. So PLG just won't work in that model. In B2B in general, it's hard.

3. 39:42

   If you're going to have big contracts with large enterprises, PLG probably don't work. It does not work. So it was number one, going all in on enterprise sales. We had tried earlier to just be this PLG product-led growth. The second thing is up-leveling the management. So we up-leveled all the exec team. Like every person on the exec team was new. So I basically got a new exec team that had much more experience.

4. 40:06

   They knew what they were doing. And a little bit went more with experience over just, hey, we're just going to be smart PhDs that can figure this out on our own. We went instead with, you know, someone who has done sales for 20, 30 years or someone has done marketing at scale at Oracle, knows how marketing is done and so on. So that really helped also with the execution because I would say we were really weak on go-to-market.

5. 40:27

   We were great at product, innovation, research. So those really helped. And then a change to how we actually innovate in open source. Just open sourcing everything and giving it away is not going to work. So we need proprietary secret sauce that we're not just giving away to the hyperscalers. So that was critical also in changing. And that's difficult to do. If you're a pure open source company, you come from academia, it's difficult to get all your employees to be all in on that.

6. 40:54

   But it was the only way to succeed. We wouldn't have been around if we hadn't done that pivot. Did you have those views as you were running product and you sort of came in prepared to do that? Or was there some point of introspection that ultimately led to those conclusions? Yeah, I think 15, we were not doing super well. And in 15, it was sort of like, okay, we are trying PLG. It's clearly not working, right?

7. 41:15

   Yeah, we don't want to do enterprise B2B because we're not excellent at it. We don't have experience in it. But, you know, we ended 2015 with 1.6 million revenue, 2015. So if we only have 1.5, 1.6 million revenue, from what we could glean from blogs and whatnot, an enterprise salesperson can sell a million dollars, a million and a half of software. That's just one AE. Why don't we hire three of them and try it out?

8. 41:42

   What do we have to lose? So that kind of emerged in 2015. The other thing was, it was very clear that no matter what we did in the innovation cycle side, the hyperscalers immediately had the same thing. They would just pick that. And in fact, they would add a little bit of stuff on top of it. And then they had the whole platform, the whole cloud. So they were always the good enough vendor. So the customers were like, well, you're great.

9. 42:03

   You have great innovation, but I can also get it from the hyperscaler. I'm going to try that first because I already have a contract with these folks. I got security approvals. I've already paid them a bunch of money. Try that first. And if it's not good enough, I'll come back to you. So it became pretty clear that we have to be able to articulate then, yeah, you can go over there, but you won't get XYZ if you go over there.

10. 42:21

    Like we have XYZ that they don't have. And so if you couldn't articulate that, then there was nothing you could give your sellers to sell. And then, you know, it was the experience that we were lacking. So I think throughout the hardships of 2015 kind of made it pretty clear that we have to try something new. And these three directions seem to be pretty viable. I mean, the one that stands out the most as like potentially a one-way door is the licensing or monetization shift.

11. 42:47

    And it's very different than the culture, I would say, of the people that are very open source purists in some way. Was that a debated decision in a very meaningful way or was it just kind of declarative? Hey guys, we have to do this to be able to build a business. I think when I took over, I was just a little bit more forceful in what needs to be done but it was big debate internally and I made it pretty clear I think I used the analogy and I said hey we have a gun and it has one bullet left in it we're not going to do a thousand things we have like one bullet left we better aim it really clearly and we better hit the target if we don't we're done here and so I made it pretty clear that this is existential the things that we're going to do and and I think when I kind of got people to wake up

12. 43:32

    because you know in the startup days you're excited you're doing stuff but if nobody makes it clear to you that hey we're actually going to go out of business in a couple of years it's not all great just because we have a big valuation I think people got in line and started thinking about okay what are the ways we can actually do this Did they quickly start showing up in the business or did they take a few quarters?

13. 43:50

    No I think pretty soon the engineers started thinking and I made it very clear to them is that this is great that you built this it's literally available now also on the hyperscalers cloud so what's the differentiation? Literally. And I made it very viscerally clear to them and I shared it. We had an extreme transparency culture to make it really clear. So get them to buy and let them understand themselves that we can't win.

14. 44:10

    We're guaranteed going to lose if we continue this way. And, you know, they kind of soon got it. We want to be successful here. So they started coming up with innovations that we're going to, this, maybe we don't need to open source.