20VC 7 Key Themes To Building A Great Company To IPO, The Right Way To Assess Market Timing & How To Balance Between Speed and Inspection When It Comes To DecisionMaking with Patrick Morley, CEO @ Carbon Black

In this episode of "20 Minutes VC," host Harry Stebbings interviews Patrick Morley, President and CEO of Carbon Black, a cybersecurity company that went public in April 2018. Morley discusses the seven core themes of building a great company, emphasizing a shared vision, a strong team, no arrogance, empowerment, reduced friction, leadership at all levels, and customer value. He highlights the importance of maintaining transparency with investors, particularly during the early stages when the market may not yet recognize the need for a product. Morley also touches on the challenges and benefits of taking a company public, such as brand distinction and access to markets, while managing communication changes and investor expectations. Additionally, he emphasizes the significance of clear differentiation and team assembly for startups in crowded markets. Throughout the conversation, the role of mature, patient investors in a company's success is underscored, with a nod to Jeff Fagnan from Accomplice for his support.

• Harry Stebbings hosts the Founders Friday segment on the 20 Minutes VC podcast.
• The show often features discussions with startup founders and industry leaders.
• Harry encourages listener engagement through Instagram for future guest and question suggestions.

"I am very excited to say it's that time of the week. It's founders Friday here on the 20 Minutes VC with me, Harry Stebbings." Harry expresses his enthusiasm for the recurring Founders Friday segment on his podcast.

The quote establishes the context of the podcast episode, indicating a focus on entrepreneurship and venture capital insights, as part of a series dedicated to founders.

• Jeff Fagnan from Accomplice mentioned Carbon Black's journey from idea to IPO.
• Patrick Morley, the President and CEO of Carbon Black, joins the show.
• Carbon Black specializes in endpoint protection using data collection, predictive analytics, and cloud delivery.
• Before its IPO, Carbon Black raised significant VC funding from notable firms.

"If you remember our episode with Jeff Fagnan at accomplice for everyone that listened intently, you will remember his mentioning the incredible carbon Black journey from idea to IPO earlier this year." Harry references a previous episode where Jeff Fagnan discussed Carbon Black's success story.

The quote provides background on Carbon Black's development and growth, setting the stage for the guest's introduction and the topic of the conversation.

• Patrick Morley has been with Carbon Black for over a decade.
• He was attracted by the company's vision to change the security model.
• Prior to Carbon Black, Patrick held leadership roles in various software companies, including three with successful IPOs.

"Well, I've been at Carbon Black for ten years, and I knew some of the initial investors in carbon Black, and I really liked the vision of the company." Patrick shares his tenure at Carbon Black and his connection to the company's vision.

This quote highlights Patrick's long-term involvement with Carbon Black and his alignment with the company's foundational goals, emphasizing the importance of vision in leadership.

• Patrick discusses the patterns observed in building successful companies.
• He outlines seven core characteristics essential to creating a great company.
• These themes include shared vision, team importance, no arrogance, empowerment, reducing friction, leadership at all levels, and customer value.
• The principles are based on Patrick's extensive experience with startups and IPOs.

"And so when I talk to new employees in the company, I talk to them about seven core characteristics of building a great company." Patrick introduces the concept of the seven core characteristics that he believes are crucial for building a successful company.

The quote introduces the framework Patrick uses to guide new employees and the company's culture, reflecting his philosophy on organizational development and success.

• The CEO's role encompasses three primary elements: people, strategy, and communication.
• The CEO must ensure the team scales effectively, maintain clarity on company strategy to avoid misalignment, and communicate the vision to align everyone with it.
• Regular assessment and adjustment are necessary as the company grows.

"I think there's three core characteristics, three core elements for the CEO. I certainly think one of them is about the people and making sure that you continue to scale the team around you."

This quote emphasizes the importance of team scalability as a fundamental responsibility for a CEO, highlighting the people aspect of the role.

"Number two, though, is making sure that you're focused on what the right strategy is for the company and being very clear about it."

Here, the focus is on the necessity of a clear strategy for the company, which is crucial to prevent misalignment within the organization.

"And then the third big component, I think, for a CEO is communications."

Communication is underscored as a key component of the CEO's role, particularly in terms of conveying the company's vision to ensure alignment.

• Empowering employees to feel like they own their department encourages risk-taking within the company's vision and mission constraints.
• Balancing the encouragement of risk-taking with the acceptance of failure is a continuous challenge.
• The company strives to maintain a balance between speed and inspection.

"The desire to allow people to run your own business, in my belief, their own department, allows people to take more risks."

This quote highlights the belief that when employees feel empowered to run their department, they are more inclined to take risks.

"And it's always a balance on embracing failure, because when you take risks, you fail."

Patrick Morley discusses the delicate balance between promoting risk-taking and managing the inevitable failures that come with it.

• Understanding the reasons behind failure is critical for learning and growth.
• Open discussion about failures is encouraged to identify the key factors that contributed to them, whether in execution, strategy, or people.

"I believe, and I think we believe that understanding what led you to where you are is such a critical part of it."

This quote stresses the importance of analyzing the reasons behind a failure to learn from it and make informed decisions in the future.

• Not all team members scale with the company; some may prefer smaller organizations or have different personal and professional goals.
• Signs of a team member not scaling include being reactive rather than proactive and lacking vision for the future.
• Decisions regarding team changes are delicate and must be made with consideration for the team dynamics.

"Some people don't scale and others choose not to."

Patrick Morley acknowledges that not all employees are suited for or interested in scaling with the company as it grows.

"When you have people, team members, who are reacting as opposed to being proactive about what's coming, it becomes very obvious that you're going to have to make a decision to bring someone else in."

This quote identifies proactivity as a key indicator of an employee's ability to scale with the company, suggesting that a lack of foresight may necessitate team changes.

• Communication, respect, and leadership are essential when scaling a company and bringing in new team members.
• Maintaining nimbleness and agility is a cultural aspect that starts with the executive team, who must balance quick decision-making with thorough analysis.
• Involving all stakeholders in the decision-making process is crucial for successful communication and alignment.

"How do you bring scale to an organization without making people feel like we're leaving some of the original team members behind?"

The quote addresses the challenge of scaling the company while ensuring that original team members do not feel left behind.

"You really want to make sure you have an understanding of why you're doing what."

Patrick Morley emphasizes the importance of understanding the reasons behind decisions to maintain a nimble culture during scaling.

• Effective communication starts from the moment an employee joins the company.
• The CEO plays a direct role in communicating the company's vision and mission to new employees.
• Continuous communication methods include all-hands meetings and regular messaging platforms.

"For every single employee I speak at every single new employee orientation, I shake every single new employee's hands and tell them why we're here and what we're all about and what we're trying to achieve."

This quote illustrates the CEO's hands-on approach to ensuring that each new team member understands the company's purpose and goals from day one.

• Effective communication is crucial during organizational change.
• It involves aligning with the company's goals and explaining why changes are being made.
• Communication should be frequent and in different forms, including all-hands meetings and written communication.
• A cascading communication strategy is employed, starting with the exec team and moving down the ranks.
• Transparency and repetition are key to ensure understanding and buy-in from all levels of the organization.

"And then as you drive through change, you've got to kind of realign again and again against what we're trying to do. And then you communicate why we're making the changes that we are, whether or not those are strategy changes, personnel changes, the way we're executing."

This quote emphasizes the importance of continuous realignment and clear communication during changes in an organization. It highlights that the reasons behind changes, whether strategic, personnel, or execution-related, should be communicated effectively.

"We'll talk about it as an exec team, then the next level down gets communicated to. We talk about it openly, we get questions, and then we do it on all hands."

The quote describes a cascading communication approach where information is shared systematically from the executive team down to all employees, ensuring openness and opportunities for questions.

"And then I always follow up with written communication to the company on what we're doing and why."

This quote underscores the importance of follow-up written communication as a reinforcement of verbal messages, providing clarity on actions and rationales.

• Market timing is a critical factor for the success of startups, potentially more so than funding.
• Alignment between the CEO, investors, and senior team members is essential to navigate market timing challenges.
• Misalignment can lead to churn and hasty decisions, which can have significant consequences.
• Changing a CEO or investors can be difficult, highlighting the need for initial alignment and trust.
• Patience and persistence are key qualities needed across the core teams to weather premature market entry.

"Timing kills more startups than dollars."

This quote from Mike Dorbra reflects the belief that incorrect market timing is a more significant threat to startups than financial issues, emphasizing the importance of entering the market at the right moment.

"And so you end up in a situation where organizations will make investors or CEOs will say, hey, look, this is just not happening in the speed I wanted it to, and I'm done."

The quote illustrates the potential for misalignment of expectations regarding market timing, leading to decisions that can negatively impact the organization.

"The moment you aren't transparent with your investors about the why and the what of you're seeing, that's where you start to lose that trust."

Transparency with investors is crucial, especially when a company is ahead of the market. Lack of transparency can erode trust and lead to organizational instability.

• Going public is seen as a step in the journey of building a long-term, standalone company.
• An initial public offering (IPO) can enhance brand recognition and provide access to public markets for potential growth.
• Timing of going public is based on market conditions and company readiness.
• Being a public company introduces new challenges in communication and transparency due to regulatory requirements.
• Public companies must invest time in helping public equity buyers understand the company.

"We knew we would bring the company public someday. I think from a brand standpoint, it helps distinguish the company. Obviously, we get access to public markets."

The quote highlights the strategic decision to go public, citing brand distinction and market access as key benefits of an IPO.

"One of the challenges of being a public company is the way that you communicate and the transparency that you exhibit inside the company from a comm standpoint, has to change."

The quote points out the communication challenges faced by public companies, which must adhere to stricter transparency and communication standards.

• Viewing the board as an extension of the team is crucial for a CEO or founder.
• Board members should share core values and perspectives with the company's leadership.
• Misalignment with board members can have a long-term negative impact on the company.
• Transparency and consistency in communication are essential to maintain alignment and trust with the board.

"You got to really view your board as an extension of the team and make sure you're aligned."

This quote emphasizes the importance of treating board members as integral parts of the team, with alignment in values and vision being essential for organizational harmony.

"Being super transparent on what's working and what's not working and doing it consistently again and again and never, ever not telling them exactly what's happening now."

The quote suggests that the key to gaining and maintaining investor buy-in is through unwavering transparency about the company's performance and challenges.

• Patrick Morley discussed his experience with investors during the scaling of Bit9 and Carbon Black.
• He emphasized the importance of having mature, patient investors who do not push for short-term decisions that could harm long-term opportunities.
• Morley highlighted the significance of investor alignment with the company's vision and market position.

"my investors were with me through thick and thin because they were part of the team... They were patient, they were mature investors, they didn't have knee jerk reactions."

This quote underlines the beneficial impact that supportive and strategic investors can have on a company's growth trajectory by being part of the team and avoiding impulsive decisions.

• Patrick Morley would like to see a change in the maturity level of investors and their understanding of their impact on young founders.
• He suggests that the lack of maturity and patience among some investors can negatively influence the decisions and direction of startups.

"I would change exactly what I just articulated, which is the lack of maturity sometimes on the investment side and the lack of understanding of the impact that the VCs can have on young founders."

Morley is advocating for a more mature and insightful approach from investors towards startups, recognizing the significant influence they hold over the companies they invest in.

• Morley stresses that as a CEO, ensuring the right people are around the table is a major responsibility.
• He acknowledges that personnel decisions are critical and can keep him up at night.

"What keeps me up at night is people. It's people. And because I think again, as a CEO, big part of my job is making sure I have the right people around the table."

The quote reflects the CEO's focus on the importance of team composition and the challenges of people management in leadership roles.

• Morley describes the Boston tech ecosystem as energetic and slightly more conservative compared to the West Coast.
• He notes the abundance of talent in Boston, although it's more diversified across industries compared to the tech-focused West Coast.

"Boston tech ecosystem is a great ecosystem... but we've got great talent here in Boston."

This quote paints a positive picture of the Boston tech scene, with a strong talent pool and a growing community.

• The main challenge in Boston, according to Morley, is the distribution of top talent across various industries, not just tech.
• He contrasts this with the West Coast, where the majority of top talent is concentrated in the tech industry.

"if you take ten a players in Boston, out of those ten a players, maybe two of them will be in tech and the other eight will be in financial services or in pharma or biotech."

Morley's quote highlights the competitive landscape for tech talent in Boston, with other strong industries vying for the top professionals.

• Morley advises startups to have a clear understanding of their differentiation and to be selective about the people they involve in their company, including investors and team members.

"Be very, very clear about what your differentiation is and be very, very clear about the people you put around your company."

The emphasis here is on the strategic clarity and careful selection of stakeholders, which are crucial for startups to stand out and succeed in competitive markets.

• Morley identifies his fixation on understanding details as both his biggest strength and weakness.
• His desire for detailed understanding helps in decision-making but can also be a drawback.

"Biggest strength is being very fixated on why something is what it is... the desire for the details and the understanding is also a weakness."

The quote reveals Morley's introspective view on his leadership style, recognizing that his attention to detail is a double-edged sword.

• Morley is optimistic about Carbon Black's future, aiming to disrupt a $19 billion market and build a billion-dollar software company in cybersecurity.

"I think we've got a huge opportunity to disrupt a $19 billion market and build a billion dollar software company in cybersecurity."

This quote conveys Morley's confidence in Carbon Black's potential for significant growth and market disruption in the cybersecurity industry.

• Harry Stebbings expresses gratitude to Patrick Morley for the interview and to Jeff Wagner at Accomplice for making the episode possible.
• The role of partners and collaborators like Jeff Wagner is acknowledged for their contribution to the podcast's success.

"I can't thank you enough for joining me and such exciting times ahead for Carbon Black... A huge hand to him for giving up the time. And I also want to say huge thank you to Jeff Wagner at accomplice."

Harry Stebbings closes the interview with appreciation for Patrick Morley's participation and recognition of Jeff Wagner's support, highlighting the importance of collaboration and support networks in the venture ecosystem.