Fireside Chat: Leadership in a Crisis: Silicon Valley CEO and VC Insights 

Featuring: Doug Knopper, Co-founder & former Co-CEO of FreeWheel 

Stacey Bishop, Partner, Scale Venture Partners  

David Yuan, General Partner, TCV 

May 1st 2020 1:30pm EDT  

EXECUTIVE SUMMARY 

Introduction  

A discussion with David Yuan (General Partner – TCV), Stacey Bishop (Partner – Scale Venture Partners) and Doug Knopper (Co-Founder & former CEO of FreeWheel, acquired by Comcast for $375 million.) Moderated by Michael Seidler, Founder + CEO of Madison Alley, the strategic M&A and capital advisory firm for digital marketing, media and advertising companies. 

Distinguished Panelists: 

• Doug Knopper:  

• Co-founder & former Co-CEO, FreeWheel  

• Led FreeWheel to $375M acquisition by Comcast  

• Stacey Bishop:  

• Partner, Scale Venture Partners 

• Notable investments: HubSpot (NYSE: HUBS), Bill.com (NYSE: BILL), ExactTarget ($2.5B, Salesforce), Omniture ($1.8B, Adobe), Vitrue ($320M, Oracle)   

• David Yuan:  

• General Partner, TCV 
• Forbes Top 100 Tech Investor, 4 IPOs and M&A exits, including:  

• Facebook (NASD: FB), LinkedIn, ExactTarget ($2.5B, Salesforce), Merkel ($1.5B, Dentsu), AppNexus ($1.B+, AT&T) 

On Leadership 

• Doug Knopper presentation highlights: “Leadership in a Crisis: Insights for Marketing and Ad Tech Companies:” 

• According to Doug Knopper’s report: As of May 2020, it was the third phase of the COVID-19 crisis – the first phase was back in March 2020, the panic phase, governments and industries were assessing the current state. The financial markets were dropping dramatically in April 2020 – corresponded to one –month periods in April where companies were planning on measures to survive and remain solvent while making major decisions about staff and costs, i.e.: starting to lay off staff, applying for loans where government help was at its beginning stages: medium- term and long-term plans.  
• Next is the phased approach of re–opening various work places, government spaces and recreation.  According to Doug Knopper, the third phase is the phase where businesses, and particularly startups and small companies, will enter. He believes that we are in a period right now in time where it’s still quiet and companies have the opportunity to start to become more solutions–oriented regarding what needs to be done, and start making those plans and answering the critical questions of what the new normal is going to look like.  
• A study by Edelman Trust: Barometer Special Report 2020 indicates we’re not going to get a lot of guidance from particularly the federal government, but rather this is going to be on CEOs and companies and boards to analyze and decide what the new normal is going to look like, leadership is going to come from the CEO in the company level. 
• Prior to re–entry, it is a critical time for CEOs and leaders of companies and boards to start getting in front of what might happen, leadership is going to come from the state level and the local level rather than we would normally expect to be coming from the federal level and so all of this leads to an opportunity for CEOs and companies to be leading.  According to Doug Knopper: “What’s going to happen I believe, is that there are three areas primarily that companies should start to look at that s: the workspace, business policy and regulations. “Regarding workspace – the key areas are social distancing rules, what / how much space, how are you going to lay out your floor plan for your company, and can people still work in the open environment.  As far as policy: a new business paradigm some of the questions are, when do businesses reopen? What is the working from home rules? What are the travel policies?” 

• Other Leadership viewpoints from our distinguished panelists: 

Michael Seidler: “As the three of you think about leadership and as you’re talking to your portfolio companies and advising them – what practices are you seeing that you think are particularly effective in terms of leadership whether that is: providing vision into the company’s strategic planning, communication, executing and inspiring their teams – what is it that you’re seeing?”    

• Stacey Bishop (Scale Venture Partners): “I mean now more than ever this is a time for grace under pressure, I think this is one thing for leaders to try to remain not super emotional but be empathetic, this is the most difficult time that’s probably the most trying time for CEOs they’ve ever been through, when we look at our portfolio we’ve had companies that have had to do layoffs remotely that’s never been done, assemble the team together remotely, you can’t have an in person discussion, therefore, all of this has to be over the phone and what I’ve seen working well is trying to keep this positive attitude – try not to be emotional from the leader standpoint. The employees will be emotional but trying to be positive about how we can see a way through this; we’ve had some companies that have had to take some significant layoffs and it’s incredibly hard but the leaders have got to stay positive and set forth the vision that it can be done, and whether it’s companies suddenly going from a high-growth plan to a cash flow breakeven plan.”  Stacey Bishop further describes: “Trying to understand how that sets the tone for now the company’s going to be in control of their own destiny if they’re in charge, they don’t need us though, the venture capitalists, anymore – they can carry on and what a different tone that sets and see it as a positive and so that’s what we’re seeing is just really being that strong leader with positivity and not emotions.”  
• Doug Knopper (FreeWheel): “Actually I think there are two really fundamental things to keep in mind: The first is that the employee base is scared and vulnerable and just as concerned as we all are, everyone‘s in this together but they’re looking for leadership right now. An employee base is looking to trust a CEO, that he or she has the right plan in place, and then secondly, is that the CEO’s role is going to change pretty dramatically in these times, now and going forward, and if you were a very product–oriented CEO or very finance–oriented CEO it might be that you have to delegate some of those responsibilities; and might be that you’re going have to get more involved in what we would normally think as HR or communication issues and you might have to give some of your product thoughts to someone else because this is going to require the full-time hands-on involvement and if you as a CEO are great at that and this is not your core strength you’re going have to find people that can and rely on people that can help you at the board level or a consultant level or an external level.” 
• David Yuan (TCV): “Once you have a stable base, really energizing the team around three things – One is its war time and not to use a strange analogy but it’s more time and so that gets people really energized about the immediacy and what you all can accomplish. I think the second two things are recognize that the car is in the shop – it’s so hard to work on your business when we’ve grown really fast and so there are also things that you want to do as it relates to your architecture and your business model, go to market model that you just don’t have a chance to really disrupt the business when it is going so fast…recognize this is a real opportunity to really work on the engine because your car is in the shop and all of your competitors cars are in the shop as well, so  if you take advantage of this quiet time and really work on some of the fundamental things as soon as you get to the future state you can really rip through this and really take market share coming out of it. Some of the best companies were really scaled through downturns like this – for example, Facebook (FB) had a down turn in 2008 and 2009 and obviously Google (GOOGL) was built in the last calm recession, so if you take the hard actions upfront you can get people to really focus on the long–term in this quiet period, you can really charge out this and just keep people energized along those three fronts, I think you can make some real progress in this COVID-19 environment.”  

Clients 

• Michael Seidler (Madison Alley) asks regarding clients– “Let’s talk about clients and the importance, during this difficult time it is challenging to be selling and to be maintaining client accounts and relationships – let alone building new client relationships and growing the current clients, how have you seen effective ways given that many clients are cutting budgets?”  “It’s difficult to have in-person meetings, have you seen effective sales strategies and anything that you might advise to clients?”  
• Doug Knopper response: “There’s a couple of principles that you have to keep in mind as you start looking at: your clients are hurting just like you are, some more than others and they’re all looking for some kind of relief, whether it’s immediate cash flow or whether it’s suspending payments. I think that if you can be creative and try and figure out what their objectives are there are things that can be done.” David further elaborates: “I have one company that’s providing software to dental offices and they’ve been growing at 50-60% per year and now that’s just completely screeched to a halt and a large number of their clients have come to them and said ‘can we suspend payments’, so what we’ve done is we’ve taken the kind the direction that will allow them to suspend their payments for a certain period of time as long as they approximately increase; for every three months of suspended payments, they have to increase their contract by one more year. So, you could imagine what that starts doing for your TCV they could end up coming out of this crisis with maybe a doubling or tripling of their TCV, I’m sure they took a short–term cash flow hit but I take that any day the week so I think those kinds of creative approaches to this really will go a long way – it’ll make their customers loyal to them and it will help the company from both sides.” 
• Stacey Bishop (Scale Venture Partners) perspective: “I mean I would say especially for some of the companies where their sales may not be happening now – we’re seeing the doubling down of the effort on the customers, and to Doug’s point, seeing creative things happen because you just don’t want your customer to churn. So, while it’s really difficult, some are kind of having this low level: still paying but, almost like a pause because they don’t want to lose the customer and have them churn and then have to go try to resell them again and try to keep the customer happy. Give them a bare-bones subscription, so they get to keep their data for a period of time and so we can help out and all of us power through this period but, we’re seeing creative ways.  I think you can earn a lot of goodwill with your customers and some companies are hoping that term goes down because people won’t be looking to switch particularly in fields that are somewhat crowded, therefore, take advantage of that and your revenue might not be as off as you think because if you can keep the turn down even though you’re not selling it you might be able to keep the base stable.”  

Product 

• Michael Seidler (Madison Alley): “So this is a segue from one of the points that you mentioned earlier David, in terms of building the engine and refining the engine while the car is in the shop – so let’s talk about product, and reimagining products and solutions for this new market environment – how do companies set themselves up to be innovative and launch new products during this environment?” David Yuan (TCV) “A general comment rather than a specific one, generally things like architecture, things like UI or onboarding processes – it’s really they just sort of punt to whenever we slow down. So again, this is a great opportunity, and those are multi-core & multi-year products that are built. I think specific to COVID-19, I think the really interesting opportunity here is, as Doug mentioned, your customers will play exactly what they want – they’re screaming out for help, and then the second point is your shoving six or seven years of adoption into a six–week period and so things like digitization and things like bringing processes online are seeing incredible adoption in a very short period of time.  Tactically, if you can talk to your clients around their search for revenue, often times they will directly lead you to specific products to consider. Then as you think about the near-term gaps of COVID-19, to generate revenue to your clients and if it aligns to long-term product growth, i.e., digitization of these certain industries and so you redirect much of your product spend on key products that matter in both the short-term and long–term”. 

Capital 

• Michael Seidler (Madison Alley): “Let’s turn our attention towards cash and capita, and we would certainly appreciate the perspectives among our panel on how would you advise marketing technology company leaders and investors at a time like this, how much cash to hold, whether to raise capital given that valuations and terms may be different – so maybe you could just talk a bit about cash management and considerations of capital in this environment.” 
• Stacey Bishop (Scale Venture Partners): “We went through an exercise with our portfolio of trying to look at this portfolio perspective, but I think it applies at the individual level of companies of who has to raise money this year and our advice to our companies was try to not have to raise this year – do what you can to extend your runway – whether it’s draw down the debt, cut your expenses, whatever it is to extend your runway so that you don’t have to go to market right now.  There might be a couple of companies that do it and there’s a bit of a world of the haves and have-nots, there are still rounds getting done that were probably underway before all of this happened for what I‘ll call the ‘class’ of companies: where they have incredible numbers and so people are still making those investments, but for others where it might seem a bit more challenging it would be to try to put it on hold and most of our companies have multiple forecasts because we don’t know when this is going to end.”  Stacey further elaborates: “I don’t think you’ve seen Q1 2020 companies hit but I think the real hit will obviously be Q2 2020 – so trying to get the sense and maybe you’re getting signals now of what is occurring, but I think that’s the hardest thing so keeping your financial models very fluid to take into account different scenarios of what’s happening because every week we’re getting more and more data. The good news is just talking to a couple of my companies – they started to feel re–engagement was happening in the past couple of weeks.  It seems like people are sort of coming up for air and they’re at least being receptive to client interactions – the question is: will they close or not and I think this is the true test of where you are on the priority stack for marketing leaders: because we are seeing budget shifts, there’s no longer in-person events so that budget shift either will get cut or it might get reallocated, so in some cases you might see some reallocation which would be good so that’s very interesting because we’ve added to some of our clients in terms of forecasting.”  

Summary  

• In summary, provided above the experience of Doug Knopper as a former CEO of FreeWheel, with Stacey Bishop and David Yuan as investors the webinar provided tangible insights from the different stages of investment as well as how you engage with your customers in this massive shift.  In the discussion, automation and machine learning has seen an uptick for martech companies and the rush to operate seamlessly in a virtual environment during COVID-19.   There has also been an increase in digitization expenditures for companies to become e-commerce ready and an acceleration of interaction in the virtual experience, as well as a need for new product launches while companies focus on keeping costs low to prepare for what is to come.