20VC: Sequoia Partner, Carl Eschenbach on Building and Scaling High Performace Teams and The Common Mistakes In Scaling A Go-To-Market Strategy

Carl Eschenbach is a Partner @ Sequoia Capital, one of the world's leading funds with investments in the likes of Google, Apple, Whatsapp, Paypal and Stripe just to name a few. As for Carl, prior to Sequoia, Carl was President and CEO @ VMWare where he grew the team from 200 to 20,000 people. If that was not enough Carl has also stepped in as CFO at a $5Bn company and transitioned 3 CEOs. In Today’s Episode You Will Learn: 1.) How Carl made the move from President and CEO @ 20,000 person company, VMWare to Partner @ Sequoia? 2.) Question from Alfred Lin, Partner @ Sequoia: How did Carl look to build a culture of performance at VMWare? 3.) Question from Pat Grady, Partner @ Sequoia: What were Carl's biggest learnings with regards to high performance teams? What are the common mistakes in scaling a go to market strategy? 4.) How does Carl view the internal workings at Sequoia to the external perception? Was the move to Sequoia everything he expected? What was different or challenging? 5.) What does Carl believe are the core components that make a great board member? How has Carl's time in operations affected his view of boards and their working? Items Mentioned In Today’s Show: Carl’s Fave Book: Half Time Carl’s Most Recent Investment: Zoom As always you can follow Harry, The Twenty Minute VC and Carl on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. X.ai is AI-poweredered personal assistant for scheduling meetings bringing you Amy or Andrew. The assistant you interact with like you would to any other person and it allows you to avoid the tedious hours of email ping pong in order to schedule one meeting. Even better, there is no sign in, no password, no download, all you do is cc [email protected] beautiful! And you can check it out now on x.ai it really is a must! Workable is the all-in-one recruiting software for ambitious companies. From posting a job to tracking and managing candidates, Workable provides everything you need to hire better. Transparent communication, organized candidate profiles, structured interviews and a full reporting suite gives hiring teams the information they need to make the best choice. Workable is available for desktop and mobile and you can find out more on workable.com where you can try it for free.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  This is the 20 Minute VC with your host Harry Stebbings and you can find me on Snapchat at H Stebbings with two Bs and writing frequently these days on mojito vc.com. I'd love to hear your thoughts and feedback on that. However, to the show today and we're rejoining one of the world's greatest funds in the form of Sequoia Capital for this part two. If you missed part one with Pat on Monday, then that really is a must. However, to part two today and I'm so thrilled to welcome Carl Eschenbach. Now Carl is a partner at Sequoia Capital, one of the world's leading funds with investments in the likes of Google, WhatsApp, PayPal and Stripe, just to name a few incredible companies. As for Carl, prior to Sequoia, Carl was president and CEO at VMware where he grew the team from 200 to 20,000 people. If that was enough, Carl's also stepped in as CFO at a $5 billion company and transitioned three CEOs. I do also have to give a big hand

• 0:45Harry Stebbings?

  to Carl's partner Pat Grady for the intro today, without which this show would not have been possible. But before we dive into the show today, there are some products that you simply cannot remember what life was like before them. For me, that's X.ai. They bring you Amy and Andrew, their AI-powered personal assistants for scheduling meetings. And the beauty of Amy or Andrew is you interact with them like you would any other person and it allows you to avoid the tedious hours of email ping pong in order to schedule one meeting. Even better though, there's no sign in, no password, no download. All you do is cc amy at X.ai. Absolutely fantastic. And you can check it out now at X.ai. It really is a must. And on the topic of streamlining traditionally long and cumbersome workflows, you must check out Workable, the all-in-one recruiting software for ambitious companies.

• 1:28Harry Stebbings?

  From posting a job to tracking and managing candidates, Workable provides everything you need to hire better. Transparent communication, organised candidate profiles, structured interviews and a full reporting suite gives hiring teams the information they need to make the best choice. Workable is available for desktop and mobile and you can find out more on workable.com where you can try it for free. However, enough from me. So without further ado, I'm delighted to welcome Carl Eschenbach, partner at Sequoia Capital.

• 1:59Speaker 01

  You have now arrived at your destination.

• 2:02Harry Stebbings?

  Carl, it's such a pleasure to have you on the show today. Huge thanks to Pat Grady for the intro, but really appreciate you taking the time out to join me today, Carl.

• 2:09Speaker 02

  Thank you. It's great to be here.

• 2:11Harry Stebbings?

  Now, I'd love to start today with a little bit about you and how you made your way into the world of VC and a quick bio of you.

• 2:18Speaker 02

  Sure. Well, let me do that. So I always start by saying I didn't venture to be a venture capitalist. Prior to joining Sequoia now eight months ago, I was more on the operating side for the last 29 years, with the last 14 being at VMware where I was president and chief operating officer. And I grew up my career starting out as an engineer and I was always interested in getting into sales. So at one point I decided to stop supporting, if you will, the sales organization from an engineering perspective and actually moved into sales itself and moved from sales into sales management and executive sales management all the way to where ultimately just eight months ago, I left VMware as president and

• 3:00Speaker 02

  chief operating officer. So I've done a lot in my career, both on the engineering side, the marketing side to go to market, and then executive management and leadership. And I've just been very blessed to have a lot of diverse experiences. And then I decided to finally step away from an operating role so I could be home and spend more time with my family since I was traveling around 300,000 miles a year, Harry, for the last decade. And with children going into high school, I thought it was best for me to be home a bit more than I had been. And in doing so, I wasn't sure what my next journey was going to be, but I knew a number of people here at Sequoia and I very quickly decided to

• 3:40Speaker 02

  join them. And it's been a tremendous experience and something I'm very much enjoying and learning a lot about the venture business and bringing hopefully my operational experience to Sequoia and our portfolio companies.

• 3:53Harry Stebbings?

  And I do have to ask, you said there about your incredible time at VMware where you saw the growth from 200 to 20,000 or so. So I do have two questions from your partners, in fact. So first one from Alfred Lin. How did you look to build a culture of performance at VMware like you did?

• 4:10Speaker 02

  Yeah, so that's a great question. So first and foremost, I fundamentally believe that it starts with the people, not the company. I believe great people build great companies. Great companies don't grow, build great people. So it's really important that you focus on your people first. And when you think about companies, a lot of people think about companies from the top of the pyramid down. Meaning they're really focused on what is this vision, strategy and direction of the company? What do they want to do? Then in the middle of the pyramid, they focus on how to execute against that strategy to be successful. But really at the bottom of that pyramid, and what keeps it all, if you will, standing tall and strong is the people and the culture.

• 4:53Speaker 02

  So I flip it upside down and I prioritize in company building. I focus on the people and building a culture that can stand the test of time and build an enduring culture. So I've always believed if you have a culture and value system that is strong, they will be able to execute and then your vision can come true. So I don't, I kind of do a bottoms up approach and I always start with the people first, the culture and the value systems and everything from there follows.

• 5:19Harry Stebbings?

  I'm really intrigued. We had Rory O'Driscoll from Scale Venture Partners on the show the other day. And he actually said that the later stage you get, the less people matter. He's obviously B and C stage. And he said that actually it's markets that make outcomes and not people. I'm intrigued kind of how you respond to that as, as you transition to the later stage.

• 5:39Speaker 02

  Well, so listen, as you get to the later stage, you can only get to a later stage if there's a market opportunity for you to go and attack and address. But you will never be able to do that if you don't have the people, right? So it starts and stops with the people and people want to work at companies that have great culture, right? And have a great value system. So just because you have a large TAM or total addressable market opportunity, doesn't mean you can be successful because if you don't have the people to go attack the market, who cares about the market opportunity? Now vice versa, you can have great people, Harry, right? And not have an addressable market to go after, that's a different. Challenge, but it all starts and stops with people and you know, as you go forward, a lot of people say, you know what?

• 6:21Speaker 02

  You don't have to focus on the culture, just like you articulated, you need to focus on, you know, the market and the market opportunity. I don't think they're inseparable. They're one in the same to me, but without great people and great people only work for companies with great cultures and values. How do you ever actually address the opportunity that the market may be providing you?

• 6:40Harry Stebbings?

  And then another one from another partner of yours in Pat Grady, who asks about the common mistakes that you see in terms of scaling and go to market organization? And kind of how your experience with VMware affected those learnings?

• 6:53Speaker 02

  Oh geez, Harry, you know, looking back, I made a lot of mistakes along the way in scaling an organization and growing it, especially on the go to market side. But the one thing I did recognize is right, if you're going to make mistakes, make them fast and move forward. And don't be afraid to make changes once you've identified the mistakes, because a lot of people identify an issue or challenge when they're going into market. And they really fight hard to fix the actual mistake they're involved in, as opposed to just saying, hey, it's not working and start over. So you have to have a strong intestinal fortitude to recognize when you're going in the wrong direction and not just try to make incremental changes to it.

• 7:32Speaker 02

  But really just start something completely new, because the only thing constant in this world is change and the world is always changing. I always used to say, if the world outside your company is changing faster than you are, then the end is very near. So you know, just recognize your challenges or mistakes and make those changes fast. That's number one. Number two, I think, you know, you have to focus on productivity. A lot of people believe because they see a big market opportunity, you have to hire lots and lots of people. You can actually over hire because you can hire a bunch of people, but if you're not getting the productivity output from each of the people you're hiring.

• 8:12Speaker 02

  It actually becomes a negative on your go to market because you have not enough people, you know, successful. So focusing on getting people successful, success breeds success, helps you scale and grow an organization. Very quickly and don't always just focus on hiring and getting the numbers. Because unless you have the right enablement tools, the training tools in a way to make people productive. You can get yourself into trouble quickly. So I've learned that. The other thing I always focused on, Harry, was what I described, your span of control. Don't overbuild your management team because you get into this environment where if you have too many managers. You have people who just want to report the news and are not making the news. I like to have people who are intimately involved in the business and make the news.

• 8:57Speaker 02

  And they're not just reporting news from their team or from their managers they're managing.

• 9:01Harry Stebbings?

  I'm super intrigued there. We spoke about kind of when things potentially do go right and when they don't go right. And the cyclical of success. In terms of failure, how do you approach failure? In terms of is it a, is it the badge of honor that often is portrayed in Silicon Valley? Is it the learning curve? What's the thesis around that when, when things don't go to plan?

• 9:21Speaker 02

  First of all, people's true character is defined during times of failure. And it's, you know, when, when things are not going right, you really find out a lot about people. And I think the most successful people recognize failure and accept failure as a way of life. Now, if you're failing every day, Harry, and you know, that's not a good thing. But if you have a track record of success and you find that failure only makes you stronger. Then you can actually really make quantum leaps in how you're leading an organization and how you're actually performing. So I, I just believe that failure is a way of life. And if you're not failing at all, you're probably not pushing the envelope on you and your team enough.

• 10:03Speaker 02

  So I look at failure as a positive thing, as long as it's not something that becomes a normal mode of operating. But failure is not a bad thing. Failure is a way to push the envelope on you and your teams and stretch people's, you know, personal envelope. And if you do that, you actually ultimately make people stronger, bigger and faster with failure.

• 10:23Harry Stebbings?

  And I, I really want to move to your transition now to the world of VC. We mentioned obviously your time at VMware and in operations. But I'd love to hear what were the, the challenges in making the move from the world of operations? To the current position you're in now at Sequoia.

• 10:38Speaker 02

  First of all, I'd start with what I describe pace. Coming out of an operating role, Harry, especially when you own, you know, operations and you're in a publicly traded company, the biggest challenge I had to really overcome was this sense of pace. And what I mean by that, in the role I was in, you focus on 90 day outcomes. You had to deliver every quarter and then you had to report to the street your performance every quarter. And that was at a 90 day clip. So while you try to focus on being quite strategic and how you build your business plan and your operating model and what you're doing, you always tend to be a bit tactical because you got to meet that 90 day objective. So you always are having a short term outcome. In the venture world, you don't look at things purely at 90 days at a time.

• 11:21Speaker 02

  Now, you want your portfolio companies to operate and execute quarterly, but you really you're looking at this thing over a multi-year period as you help them on this journey to build an enduring company. So I'd say pace is the first thing. There's a lot more thinking time, a lot more analytical time here in the venture world than there was in an operating world. So that was the biggest change initially, was just to slow down, think more and understand we're playing for the long game, not the short game. The second is how you influence people. In a leadership role in a large company, you can describe what the North Star is. You can put an execution plan in place and you can go violently execute against that plan,

• 12:03Speaker 02

  which ultimately defines whether you're successful or not, and then you can hold people accountable. Here, working with portfolio companies, you have these brilliant young entrepreneurs who are building the company and it's their company. So here you have to go in and be more of an influencer. You have to instill upon them your experience and give them guidance on what you think might work or not work. But at the end of the day, you can't make them do it. They have to want to do it. So again, that transition of, hey, we're going to go and do this. This is the outcome. I'm the leader of the team. Let's get it done. Versus now going and working with teams and saying, hey, this is what we might think about doing. This is what you should try. But when you walk away.

• 12:45Speaker 02

  From their office, you're not inside the building any longer and you might not see them for two or three weeks. They have to then want to go and execute on something that you brought them and you can't force that upon them. They have to trust you and believe in you and what you're sharing with them, but they actually have to go do the execution. You can't. So that role moving from execution orientation to being an influencer was the second biggest transition I've had to work on.

• 13:11Harry Stebbings?

  I'm super interested. You said obviously about being an influencer there. And having seen boards from both the operational side and now the V C side. I'd love to hear your thoughts on what the core components are that make a good board member to you, having seen both spectrums now.

• 13:26Speaker 02

  So first and foremost, the board has to be supportive. They have to not just show up and come to a board meeting once a quarter or once every six weeks and say, okay, I'm on the board. This is what I'm gonna do. I'm gonna come and listen and not provide feedback. You have to actually care about the company and you have to want to be influential. And you wanna be seen as someone who is there to support them, not just question them. I've seen both type of board members, the ones who come in and question and think they know it all. And the ones who are there to say, hey, I'm here to support you, to help you build and grow your company. And I think the latter is the most successful ones who are there to help them and bring their experiences to the table.

• 14:09Speaker 02

  And then the other thing that I think is critically important is the board meetings is just a meeting. It's a three hour meeting. The most successful board members are the ones who work with the company outside of the board meeting itself. On more of a day to day kind of operating model. Now, you're not there every single day, but be involved in the company and participate in what they're doing. More than just at the board level and the board meeting level, but really take the responsibility of being a part time employee for that company to help them build and grow and scale the business. They're the most successful ones, not the ones, and I've seen them both, as I said, Eric, just sit there and question everything you're doing.

• 14:51Speaker 02

  And try to pretend they're the smartest man or woman in the room. That's exactly what. You don't want on your board.

• 14:56Harry Stebbings?

  I'm intrigued. Is VC everything you expected it to be now having seen the internals and with the kind of obviously, I'm sure kind of perceptions that you had pre joining Sequoia. Is it everything you thought of? Have there been any big surprises?

• 15:09Speaker 02

  I don't know. I came in with my eyes pretty wide open. I I knew I'd have to be patient. I know I knew it would be an adjustment for me, Harry, and being now here at Sequoia eight months, probably the biggest surprise is just how powerful a partnership Sequoia is and the fact that we have global presence around the world between here, India and China, that whole kind of notion of the world is flat. We took that to heart years and years ago. And just watching how powerful Sequoia has become on a global basis has been quite surprising to me. And the other thing is, I just think it's a it's a partnership here at Sequoia that is one that is

• 15:49Speaker 02

  very much has a team atmosphere. So while as a venture capitalist, you do work a lot on your own. There is nobody at Sequoia who I have found where I can't go and ask for help or ask questions, who isn't willing to step up and help you be successful as an individual and support the firm as well as support our partners, our LPs in the companies we're working with day in and day out. So I'm probably just my biggest surprise is just how powerful of a partnership Sequoia is and how much they have to offer our portfolio companies. It is very, very impressive. And then the other thing I'd say, I knew that the venture capitalist community is quite competitive. There's a lot of capital that's been brought into the market over the last decade.

• 16:33Speaker 02

  It seems like, you know, money is pretty cheap and you can get it quite easily. So maybe I didn't understand or really grasp the competitive nature of the venture community. At the same time, I found that if you collaborate and work and build deep and meaningful relationships with other venture firms and partners, actually, they're very willing to work with you. The ones who are competitive are the ones who you probably never reached out to and tried to engage with.

• 17:00Harry Stebbings?

  Now, this sounds very naive and probably amateur, but we're talking about kind of VC differentiation there and the competitive landscape. One would automatically assume with Sequoia's incredible brand and platform that winning deals is not a problem. What's the approach to that in terms of the competitive environment? You know, because Sequoia is Sequoia, is is kind of deal competition still a problem?

• 17:24Speaker 02

  Yeah, as I said, Harry, it is a very competitive business that we're in, right? Because everyone, you know, has access to capital these days. But for Sequoia, we do focus on our past success. We have an amazing brand. We have tremendous experience inside the building that we can bring our companies, whether it's in an operating role, whether it's in engineering, whether it's in sales, whether it's in marketing. We have a tremendous amount of experience coming from the financial world and, you know, people coming out of a different type of financial services companies, whether it be Goldman Sachs or any of the others. So I just think our experience, our understanding of pattern recognition and the fact that we have helped so many great companies,

• 18:08Speaker 02

  some of the greatest technology companies in the world, have successful outcomes, whether it be through an acquisition or taking a company public and having a 10x increase in their market capitalization. I think the brand, the experience and the resources that we can bring a young company is unlike anything else in the venture community.

• 18:28Harry Stebbings?

  And I'd love to dive into a quick fire round with you. So I say a short statement and then you give me your immediate thoughts. How does that sound?

• 18:35Speaker 02

  Uh, sure. Okay.

• 18:36Harry Stebbings?

  So it's about 60 seconds per one. So the first one is your favorite book and why?

• 18:42Speaker 02

  Well, it's actually pretty relevant. One of my favorite books of all time is a book called Halftime. It's written by Bob Buford and it's been around for a long, long time. And it's this book that talks about as a middle-aged male, at some point you get to the halfway point in your life and you should stop and reflect to think about what happened in the first half of your life and the impact you've had on the world. And then stop at halftime and say, okay, great, I'm going into the second half of my life. What do I want to be remembered as? How do I want to impact the world? How do I want to influence people in my family? And really stop and just pause to think about that. And having just turned 50 yesterday, it was just an impactful book I read many, many years ago that helped me set on the course and direction

• 19:26Speaker 02

  on how I want to live my life in the second half of my time here on earth and how I want to impact people around. And the people I touched or influenced both directly and indirectly.

• 19:38Harry Stebbings?

  Well, a huge congratulations for the birthday yesterday, but then I want to move to your biggest mentor. Uh, and, and kind of the origin of that relationship.

• 19:46Speaker 02

  Yeah, so most people, when they talk about mentors, they talk about mentors through the eyes of their business. You know, success or business career. My mentorship goes back to my father. It's very easy, right? He was a, an amazing man who grew up, who focused on his family first. Uh, didn't have a college education, came out of the service and just worked really, really hard. And built a tremendous business, but his business was his family. His family meant everything to him. He did everything he could to ensure that his family was close. His family was safe and secure and provided the best he could financially for us. And somehow he got into business himself, owning ice cream stands and selling Christmas trees.

• 20:28Speaker 02

  And he just taught all of us, the end of the day, the most important thing you have in life is your heart. While your heart is not the biggest muscle in the body, it's the one that counts most because without it, uh, you can't survive. So he taught me to, uh, live my life to the fullest, focus on my family. And always follow my heart first because it's the only thing that matters at the end of the day.

• 20:49Harry Stebbings?

  And you've said before that your most interesting role ever was a sales engineer at Net. Why was that?

• 20:55Speaker 02

  Yeah, um, because it was a, it was an exciting transition for me, being an engineer. But knowing I wanted to get into sales, it afforded me the opportunity to maintain my engineering background. But also get into sales and it basically became a, a one man band job. Where I was the engineer and the sales rep simultaneously, supporting customers and selling solutions and products and goods to the customers. But not having an engineer do it for me. And it just showed me the importance to maintain your technology background and knowledge. Because if you just were to go into a customer and only try to sell something.

• 21:36Speaker 02

  And not be able to back it up with a business acronym and technical acronym at the same time. They would look at you as just a salesperson or a. Sales leader or a sales executive. So I was very lucky to have the opportunity to do that role. And again, it just taught me to make sure you always maintain your technical expertise while picking up a lot more business acumen along the way.

• 21:57Harry Stebbings?

  And then I want to finish then on your most recent public investment and why you said yes.

• 22:02Speaker 02

  So Harry, I've been here eight months and just two weeks ago, I was part of a Sequoia-led deal, myself and Pat Grady, into a very, very exciting company. That is not public. It should become public in January, but I can't be more excited to to announce this partnership and this investment. I think it's an incredibly successful company and with our partnership going forward and me taking a board seat, I really hope we can help this company accelerate its growth and drive deep into the enterprise to revolutionize a market segment that hasn't been disrupted in years.

• 22:40Harry Stebbings?

  Well, Carl, I was told that it would be an incredible episode by Alfred and by Pat, and it's by far exceeded all expectations. So thank you so much for joining me today.

• 22:49Speaker 02

  Thank you, Harry, for having me and I'm always here to answer any questions or help you along your journey too.

• 22:56Harry Stebbings?

  What an incredible guest and Carl has been so kind to me. So I want to say a huge thank you to him for that and for all he's done for me and the show. Also a big hand, Pat Grady, for the intro today to Carl, without which the show would not have been possible. And if you loved the show today and would like to see more from us, then you can follow me on Snapchat, at H Stebbings with two Bs, or you can follow us on Twitter, at TwentyMinuteVC, or check out the blog on MojitoVC.com. I'd love to hear your thoughts and feedback on that. However, before we leave you today, do not forget that everyone needs Amy and Andrew in their life. Yes, this is X dot AI bringing you the AI-powered personal assistance for scheduling meetings. And the beauty of Amy or Andrew is you interact with them like you would any other person and it allows you to avoid the tedious hours of email ping pong in order to schedule a single meeting.

• 23:39Harry Stebbings?

  Even better though, there's no sign in, no password, no download. All you do is super simple, cc amy at X dot AI. Absolutely perfect. And you can check it out now at X dot AI. It really is a must. And the other pain point for startups is always hiring and that's where Workable come in. Workable is the all-in-one recruiting software for ambitious companies. From posting a job to tracking and managing candidates, Workable provides everything you need to hire better. Transparent communication, organised candidate profiles, structured interviews and a full reporting suite. Gives hiring teams the information they need to make the best choice. Workable is available for desktop and mobile and you can find out more on workable.com where you can try it for free. As always, I so appreciate all your support. You can always email me on harry@the20minetc all in letters.

• 24:23Harry Stebbings?

  I love to hear your feedback and please, I look so forward to bringing you Friday's episode with Kevin Chow at Kabam.