From Startup to Global Scale: Securing and Building the Company’s Culture Are Keys to Success of Tech Leaders

The days when technology chiefs could focus simply on hardware and software are gone. For technology leaders, aligning IT with long-term strategy and attracting and nurturing a winning team has become key in a world where customer expectations are growing, and the pace of change continues to accelerate.

Today’s technology businesses need to think strategically at the local, national, and global level. Many companies run business online or mobile first and are getting creative and competitive advantages from collecting and analyzing consumer data. This provides both opportunities and challenges: on one hand, companies can get access to global customers fast, yet they are also facing competitors both at home and abroad, not to mention threat actors who could be located anywhere and can come at you with sophisticated attacks. It’s your talent against theirs – with your enterprise and your customers in the middle.

At TCV, we’ve been focused on talent and culture as critical success factors for more than 20 years. Many of our investments have turned on building or sustaining successful cultures and nurturing them with the right people. For this year’s invitation only CTO/CIO Summit we decided to look at talent and culture together with the challenges of globalizing and securing the enterprise. We brought together over 40 technology executives, including founders, product leaders, TCV partners, and — of course — CTOs and CIOs, in Half Moon Bay, CA, for an opportunity to build peer relationships, learn from shared experiences, and discuss top-of-mind issues facing these leaders. We also mixed up the “talent” for the event itself, drawing not only on working CTOs and CIOs but also career IT experts with consulting and investing experience across multiple industries.

For us, the most important part of the two-day event was gaining a deeper understanding of both the challenges and opportunities technology executives need to balance, including:

  • Winning the Talent Wars and Creating a Winning Culture
  • Building a Globally Distributed Organization
  • Privacy and Identity Initiatives and Securing the Enterprise
  • Our agenda centered around best practices in scaling a global organization. Other topics we discussed included how to integrate acquisitions and best practices in managing a global workforce.

Here are the highlights:

Over dinner, Zillow CTO Dave Beitel spoke about how technology has transformed the real estate industry. Dave joined Zillow in 2005 and has seen the company grow, both organically and with 13 acquisitions in the last 12 years. Dave explained the importance of creating a strong culture across multiple locations and laying out paths to career development to motivate teams as organizations scale. He also provided advice on a common challenge that many growing companies face, particularly how to integrate offshore teams and make them an extension of existing efforts rather than adjacent resources. He also discussed with the group how to achieve success in scale with multiple office locations and different cultural identities.

Tim McAdam led the next day’s first panel with Victoria Schillinger, VP of HR at Alarm.com; Caroline Horn, Partner at Andreessen Horowitz; Michael Morell, Managing Partner at Riviera Partners; and Jonathan Schoonmaker, SVP of HR at FinancialForce. Their topic: winning the talent wars against today’s tech giants. The practical tips flowed freely, starting with university recruiting. Pick a few schools and work them, including both Ivy League schools and state colleges. Build relationships with influential faculty. Introduce your brand to younger students, not just seniors. When they become interns, give them meat to work on, not crumbs – having an impact is what they value most. If they turn down an offer, wait 2-3 years and call again – they may not be having the impact they expected at that big company they chose. Retaining key talent has to be proactive. Sit people down and map out how they will develop themselves and increase their impact by staying with you. Give them management opportunities so they can imagine themselves as leaders. Don’t expect diversity to walk in the door — look for talented, highly motivated people who come from completely different fields such as law or the military. And finally, the 90 days after a new hire starts are more important than the 90 days spent hiring them. Set them up for quick wins, build in plenty of touch-points, and make sure they’re comfortable in the culture.

Ted Coons continued the conversation with a focus on talent and culture, talking with Kameron Kordestani, a partner at McKinsey & Company, and Otto Berkes, CTO of CA Technologies, about building a globally distributed company. Both speakers separated the “artifacts” of culture – posters, slogans, logos – from its essence: ways of working that make the organization succeed. People who embody those essentials should be made ambassadors to new acquisitions or newly built development centers, so that people new to your culture can experience it live. When new team members absorb it, they should be given broader responsibilities in the combined company – this leverages their talent and inspires their original team. Particularly after M&A, the acquired team needs to understand its role and contribution to the combined entity; this should happen quickly and positively. Pay for travel if you can; people in far-flung organizations form bonds faster when they meet in person. Both Otto and Kam warned against sticking too closely to integration playbooks, particularly when the acquired technology is new or different. Sometimes a talent-rich team should not be integrated rapidly. Don’t compromise on security or safety but take time to observe how they work before you impose on a new team – the last thing you want to do is spoil an acquisition by how you integrate it.

TCV EIR Jonathan Shottan, Manmeet Singh, Co-founder and CEO of Dataguise and Pablo Jensen, CTO of Sportradar pulled back the curtain on Europe’s General Data Protection Regulation (GDPR) and California’s new privacy laws. Simply put, GPDR is about What, Where and Why: What private data do you have? Where is private data stored? Why do you need to process that private data? Both the compliance challenge and market opportunity of the new regulations are huge and what unites them is the challenge of identifying the vulnerabilities. Many companies mistakenly believe they are compliant, because they encrypt and segregate various types of customer data physically or in the cloud; but when they bring data types together for analysis, they create “PII” – personally identifiable information. The new laws also require companies to delete data if customers demand it, but that’s likely to create havoc with legacy database applications built on relational technology. And how do you delete older data stored on physical media? Enter data masking, at production scale, to stand in for deletion and encryption. First movers — with enough IT spend on decoupling, segregating, and masking data — may even competitively enhance their brands as “more secure” than others.

After lunch, Ted Coons and Charles Beadnall, CTO of GoDaddy, delved into the transformation of GoDaddy’s culture, a process that started back in 2013. Engineers loved the company’s mission of providing small businesses with a home on the internet, but deterrents included fly-over geography, aging facilities and sensationalist marketing. With a new CEO – and marketing campaign – GoDaddy began recruiting heavily. The challenge was forming a new culture that welcomed both existing employees and a flood of new developers in ways that produced better products, faster. Charles employed a version of the 80/20 rule: if he could populate 20% of a department with more diverse people who modeled the right behaviors, they would tip over the rest. The company hired people based on referrals, recruited many female graduates from local universities and placed experienced diverse hires in senior IT roles. Charles also drew in Ph.D.s from MIT and spent time with teams around the globe to transform a culture while keeping the company focused on growth.

Matt Robinson led the day’s final session on securing the enterprise with Amir Ben-Efraim, co-founder and CEO of Menlo Security; Rob Fry, VP of Engineering at JASK; Robert West, Managing Director at Deloitte LLP; and Christian McCarrick, VP of Engineering at Auth0. Matt first asked the panel how CIOs and CTOs should differentiate among today’s legions of security providers. Recommendations included assessing your vulnerabilities so you’re asking the right questions, getting referrals from peers, and anticipating the inevitable consolidation among security providers. Not every company needs an industry giant – those companies were startups once, and today’s upstarts may have superior technology. The panel then discussed prioritizing among today’s proliferating threats. Getting governance in place is critical – if no one fully owns the security portfolio, priorities will be set for the wrong reasons. If the role falls to you as CTO or CIO, you must be (or become) a good storyteller to convey the threats to your company and build consensus on addressing them. It’s also vital to recognize that malware will get inside your systems, but it won’t be the end of the world if you’re prepared. Ultimately the biggest weakness of all security systems is the human element. Education and training are essential and need to be on the agenda regularly. In addition, Amir argued that companies should hold vendors to a higher standard, aiming to receive 100% efficacy to keep companies protected.

We are grateful for all the valuable insights our speakers shared with attendees and the TCV community we strive to create. We look forward to exploring new topics and connections during our next TCV event.

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The views and opinions expressed are those of the CTO/CIO Summit speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”).  This summary is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed.  Not all companies discussed above are TCV portfolio companies.  Any TCV portfolio companies discussed above are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/.  For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.

 


Alarm.com Cuts the Cord

The day Steve Trundle’s first home alarm system was installed, he was outside with garden shears in his hand. He realized that he could easily reach up and cut the phone lines that connected his system to the monitoring company. “Suddenly it didn’t seem so smart to pay a monthly bill for something anyone could disable in two seconds,” he recalls. His vision of wireless, internet-enabled home security was born.

Trundle, then an executive at public software company MicroStrategy, gathered product design and engineering talent to build a product that would become Alarm.com. It took three years to field a do-it-yourself kit for homeowners that debuted in 2003. That milestone was also the beginning of Alarm.com’s first pivot. “We saw that there was already a whole universe of local security service providers all over the country,” Trundle explains. “We decided that rather than battle with the industry, we would partner with it, accelerate it, and transform it.”

To establish a channel with the security industry, Alarm.com began developing partnerships with security panel manufacturers and service providers. Integrating Alarm.com’s proprietary cellular communications module with security panel equipment eliminated the vulnerable wire that anyone could cut and provided a reliable connection to Alarm.com’s cloud-based services. For the first time, customers could control their security panel — and monitor their home — from any remote interface. This great leap forward quickly helped Alarm.com to develop productive partnerships with thousands of local security service providers who could exclusively offer interactive security monitoring to their customers.

This audacious strategy succeeded because Alarm.com’s software architecture made it possible to add new services to a security system via the cloud rather than physically replacing the panel. By leveraging data from the security system and integrating connected devices into its services, Alarm.com enabled innovative and engaging new capabilities. Proactive security alerts and home automation solutions like energy management, access control and video monitoring, helped to make security systems more valued and customers less likely to cancel their service.

TCV began monitoring Alarm.com’s progress when the company’s installed base was close to half a million “roofs” – industry slang for buildings with a security system. Alarm.com was a striking fit with an investment thesis that TCV was developing for the next-generation connected home, led by Tim McAdam, Jake Reynolds, Kapil Venkatachalam, and Scott Kirk. The TCV team had spent significant time talking to security dealers and industry thought leaders at ISC West, an annual security conference, and realized the need for improving end customer retention, the most important metric for managing a security dealer’s business. All of these conversations pointed TCV again and again to one company with a leadership position and a team committed to success: Alarm.com.

Then, in 2011, Nest introduced a thermostat that could be managed wirelessly, and industry analysts began publishing predictions about the “Internet of Things” phenomenon  – often called the IoT. The TCV team realized that if Alarm.com was going to maintain its early lead in connecting homes to the cloud, it had to accelerate its growth to millions of roofs – fast.

Trundle saw it, too. He had known Tim McAdam since college at Dartmouth, and they agreed that the time was ripe for Alarm.com to make another great leap forward.

“TCV understood everything we had done to that point, and they knew how to do the big things we needed. Other VCs thought we weren’t disruptive enough, but TCV focused on our business model. They got how durable it was, and how rapidly it could scale.”

– Steve Trundle, CEO of Alarm.com

TCV invested in Alarm.com in 2012, McAdam joined the board, and Alarm.com shifted into high gear.  TCV helped strengthen Alarm.com’s management team and Board with the recruitment of new board members Don Clarke and Darius Nevin, as well as Jeff Bedell as Chief Strategy and Innovation Officer, Dan Kerzner as Chief Product Officer, and, more recently, Steve Valenzuela as Chief Financial Officer.  In addition, Alarm.com moved quickly to acquire several adjacent companies that allowed it to broaden its product footprint, entered large new markets in Europe and Asia/Pacific, partnered with industry giant ADT, delivered new apps for mobile phones, televisions, and voice assistants, and extended its data analytics program into machine learning and AI.

“Alarm.com was the first company to provide a smart home security system with an easy-to-use interface primarily accessed on a smartphone. The security functionality quickly expanded to include lighting, energy management, and camera management,” McAdam relates. “Alarm.com was a pioneer in bringing all of these disparate services into the mass market in one app and ultimately has become the market leader in the connected home as well as the most under marketed example of a dominant IoT business.”

With a stronger team and investors who brought best practices for rapid growth, Trundle soon faced the question of when to go public. After starting the process for a 2014 offering, Alarm.com put it on ice until 2015. “The timing didn’t feel right,” Trundle recalls. “Sometimes as CEO you have to make tough calls based on your gut.” That instinct proved prescient, as the company successfully completed its IPO in 2015. TCV showed its commitment to the company and IoT by increasing its investment just prior to the IPO.

The company raised over $100 million in fresh capital with its IPO and moved quickly to invest it in new growth opportunities. Alarm.com acquired the Connect platform from iControl Networks, which serviced a different segment of the security and automation market, and grew its global installed base to more than five million roofs in 2017. The number of security dealers using Alarm.com to offer interactive services climbed to more than six thousand worldwide, and a group of super-dealers emerged to lead the way. The company’s standing in the connected home market has never been stronger.

These achievements are all the more remarkable considering that Alarm.com is headquartered in the Washington D.C. area – on the other side of the country from Silicon Valley. “We learned a long time ago that great companies can be founded and built anywhere,” TCV’s Kapil Venkatachalam says. Trundle says that he overcame any geographical disadvantage through smart hiring. “The Washington D.C. area offers a rich talent pool and we attracted many of the best engineers in our area because we’re one of the few market-leading tech companies here,” he points out, “and with TCV we’re also connected to the talent pipeline in Silicon Valley.”

Top talent remains a priority, because the connected home market is now eyed by all the major players in technology. Startups continue to form with dreams of disrupting the security industry. In a dynamic time and marketplace, Alarm.com must maintain its technology lead while strengthening its relationships with incumbent manufacturers, distributors, and installers. McAdam concludes: “When we look at global penetration rates for the connected home services that Alarm.com offers, the math suggests single-digit penetration. We have a lot of market to take over the next decade.”

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