UB Insider #20: How Qualtrics Went International (and How You Can, Too)
About this episode:
Owen Fuller, Chief Evangelist of Boombox, interviews Ryan Smith, co-founder and CEO of Qualtrics, about how he took Qualtrics from being three guys in a basement to a multi-billion dollar company, how the recession was actually a boon for the company, and how others can benefit from what he learned along the way.
In this special episode of UB Insider, hear the interview, which was done on stage at the World Trade Center Utah seminar, Taking Utah Tech to the World, Thursday, August 11, at Adobe. It has been edited for length and clarity. The summit also featured a panel about expanding internationally, which you can read about here. Subscribe to our podcast or download this episode on iTunes and Stitcher.
Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. When it comes to doing business internationally, Utah’s done pretty well for itself with companies from North to South making names for themselves globally. Taking a company from startup to international business can be tricky though.
The World Trade Center Utah, in partnership with the Utah Technology Council and Beehive Startups hosted a seminar for businesses interested in making the leap to going international. Part of the seminar was Boombox Chief Evangelist, Owen Fuller, asking Qualtrics Co-Founder and CEO, Ryan Smith, about his experience taking Qualtrics from a startup with three guys in a basement to a multi-billion dollar company with more than 1,200 employees in eight offices around the world. Listen up.
Owen Fuller: So I guess the first question is, you started with a few guys in a basement. At what point did you start thinking international? When did that kind of come on your radar?
Ryan Smith: So first, I think that, you know, in our world there wasn’t the startup momentum that we have now. I didn’t know that this is what I was going to do. I was two years in and my dad wouldn’t let me go do this startup. So I had to go take a job at Ford. And I was like, what do you mean? I’m almost making as much money as they would offer me if I graduated here, and I’m only working part time. So I ended up taking an internship at Ford. They wanted me to go to Dearborn, and I was like, I’m not going to do that. At the time, this was in the shadow of the dot com so no one wanted to go to a tech company.
Owen Fuller: What was the job at Ford?
Ryan Smith: I was in charge of, well this is funny, because they wanted to offer an internship. They did like two internships at BYU at the time. Everyone was saying go to HP or go to Ford because tech companies are a bust. And I said I’m not going to Dearborn. They said, will you go to Denver? I said yeah, I’ll go to Denver because working at Qualtrics I can get back quick. And I ended up on my lunch break, about three weeks in, closing Royal Caribbean Cruise Lines as a customer. And then I was like, whoa. That’s enough to pay me for the year. So I can actually go do this.
At the time we weren’t thinking anything about international. Specifically, I remember one situation where I got into almost a fist fight with my brother Jared. This was right before he left to Google. Because we were holding up the release of our new Qualtrics engine. We had torn down the first one because we didn’t think it was good because he wanted the ability to localize all of the words and all of the text that could ever be entered into Qualtrics with one dump of a file. Where we could put it back up. And this was in 2005, right? And we got into a fight because I told him, there’s no way in hell we’re ever going to need this. Why are we going to do this? And I need to get this thing out here. And he was right.
He then went on to Google and then went on to run product for China where he’s running a third of the world’s internet search in probably one of the craziest times between tech and the Chinese government. We know what happened there with the hacks and all of that. He’s always been a great global thinker that’s helped me because, you know, he spent most of his years, he went to school in London, thinking at a global scale. You need those people around you because there’s going to come a time when you need that.
Owen Fuller: Yeah. So how did it start as far as, were you getting inbound interest from these other, from people in other countries? From businesses that were interesting? Or did you start going outbound? And how did that kind of…
Ryan Smith: No. I think you’ve got to look at it from just, I mean, if you were to look at it from a revenue and a brand perspective, first of all, we have a product that we developed that I don’t think anyone would have known of at the time that set the forefront of, at first it was called research. Right? Now it’s not called research, what we do, it’s called business. Right? I mean, you’d better get data to make decisions or you’re going to fail. That’s all there is to it.
So in 2002 it was a department, and we could see that it was coming around to be a way of working. So we got behind this notion, wait a minute, we’re going to change the way that people work. Like, with the internet, people can actually create a form or survey or some way to communicate and gather quick, actionable insight and make a decision. Whether it’s to name a cruise ship, what product Under Armour is coming out with, and if you don’t do that, you’re going to be guessing. And that manifested itself very, very well in 2006, 2007 and 2008, which is actually the worst time to be bootstrapping a startup. Especially as you’re going through some sort of a growth mode and you’re kind of out over your skis. In our world it was actually the best time because we had a cyclical, we just had a different reaction that was counter cyclical where we ended up scaling incredibly fast during the downturn because people felt like, I’ve only got four bets to make now, three of them better be right. And so, and we thought about, from an international standpoint, we target every single company internationally, but why do we only have U.S. revenue? And it started once with Canada.
I got a call and we started working with a company in Canada and I said, how many more are these? How can we do this? And the issue we ran into was we didn’t have enough money to bootstrap, it’s like the equivalent of putting everything on your personal credit card. We didn’t have enough money, or you know, kind of the guts to go way out and bootstrap a team somewhere. So I did the responsible Utah thing and I grabbed some of those kids up at BYU who spoke different languages. We had them come in at night. And while they were in school I said, hey, don’t go clean the Tanner building. Come in and work at Qualtrics. We’ll set this up where you can dial, so we started making a lot of money from Utah calling into these offices. And so, for example, when we went over to Europe we were doing $400,000 a quarter.
Last year, when I opened up my London office for the first time, we had 300 customers come to our office opening, right? So we went over to Sydney. We launched Sydney at the beginning of last year as well, and we ended up doing about $500,000 a quarter when we went into Australia. And all of that was done from here. So when we hit the ground we could really see how we could ramp that up. And the idea is, a lot of companies try to expand before they’ve figured it out all the way. And to me, that’s like hell on Earth. Like, why would you ever want, why would you ever want to be trying to be scale something that you don’t have 100% confidence, or as much as you can that it’s going to work? You just don’t have to be in that situation any more.
Arguably, if you look at how we’ve gone into Dublin, we already knew we had the revenue pockets. We already knew how to the go to market went. We knew how the product worked. So we didn’t go in there and hire 10 people and kind of flip around and thrash around. We went in there and scaled up to 200 people. So if you actually took a three-year view of what would have happened if we would have gone earlier, we went further in one year that most companies would do in three years and we didn’t have to go through the pain. Arguably went further than people would go in six years.
Owen Fuller: Because you went a little slower at the beginning.
Ryan Smith: Because we went a little slower, but then we went fast. It is easy to scale a business if the metrics are right. It’s easy if you’re Uber to go scale right now. It’s hard legally and all of that stuff, but it’s not hard to scale Uber in a city when the metrics look like that. What’s hard is when you’re scaling and the metrics don’t look like that. When you don’t know the product market fit. You don’t know exactly which way to go and what you’re going to leave with.
Owen Fuller: So you have the benefit of time now, the perspective of looking back. And you know, there are people now that are in all different states. Like our business now, our product is in front of 50 million people a month. 62% of that engagement happens outside the states. And so it’s on our mind and we don’t have an office, you know, anywhere besides here right now. So when you look back, what do you wish you could have told yourself then when you were getting started with this international push? Is there something that you learned maybe through the school of hard knocks?
Ryan Smith: I try not to think about that stuff. I’m always like, I’m the go forward person. Look, I think there’s a lot of lessons. I think that if we did it differently we could have gone earlier. For sure. But given that we were bootstrapped, and the only way we were actually going to get the real momentum to do it right, I needed to throw some money at this. And emotionally, as a bootstrapped company, I wasn’t ready to write a $2 million check and put it on my own personal credit card to go double down on Dublin. And you know, so if we would have done anything different it probably would have been, we would have had to take funding earlier. Which I do not regret. I actually think we aced that part of the process as I look around, especially what’s coming for a lot of these companies. We aced it. But we could have done a lot more around the brand, around testing different models in different markets. That’s a great example of what we’re doing now with international.
We can set up a different pricing structure in France. We can release first to some of these countries. We could have set up the infrastructure a little better from data centers and stuff like that. We now have a Canadian data center. We have an Australian data center and that’s opening up a lot of doors. But given the timeframe I don’t have a lot of regrets on how we’re doing it because I’m looking at the progress. We closed a $10 million deal yesterday in Europe. It’s pretty cool coming out of an office that has been open for two years. The biggest deal in the history of Qualtrics came through Europe yesterday. And they backed it on with another million dollar deal annually. So that’s pretty exciting to watch the demand for what’s going on happen over there with a young team. And they’re educating us. I love the fact that we need to learn from them over here. The fact that this is the holy grail and our model is so great over here. No!
What if we could start the model from scratch with everything we know over there? So we just hired a head of marketing in London that came from Google. She was nine years at Google. And I said look, there’s no holy, sacred cows over here. If I could stand up our entire organization again I would probably do some of it a little different. And so you get to do that! You get to stand up an organization that has 2016 as a starting point. And everything that we did in 2008 is pretty close to irrelevant.
Owen Fuller: Yeah. That actually brings up another point that I think is big, which is this idea of taking the culture that you have which is so strong here. You kind of have this home base where there’s a culture that’s built. How do you export that culture and make sure that, you know, there’s unified vibes throughout all these different offices?
Ryan Smith: So first of all, if you think you’re going to maintain the culture, you’re going to be in for a rocky road, right? I always say that the culture needs to change. I talk about our basement days. Like, everyone wants to hold onto that basement culture and I hated it. The basement sucked. It’s like being a burn victim. I don’t want to go through it again. The reason why is we had no money. I could dream, couldn’t implement. Had no resources. And I always wanted to be able to offer healthcare for free. I always wanted to be able to take care of people and comp them right and do all those things. And I get to the point where we can do that and I want to go back there? It’s like, what hamster wheel are we on? No. We’re not going to be that way, first of all.
And then when we went to Dublin it became very apparent that culture is going to be different. I mean, you’ve got the most dry like, sober environment and then you’ve got a country where the entire country has an alcohol problem, right? And so we just embraced it. So what we did, we went down to the Guinness factory. We bought an old pub that was like their test kitchen pub. You know, for five thousand euros. We set it up in our office and we’re like, ok, if you guys are going to party, let’s party here. Bring your friends over, right? It’s a great parenting lesson, right?
So, and nothing was better than this year. I went over to the web summit or founders. It’s over in Europe. And we’re on this huge pub crawl. So they set up like six pub crawls. And I’m in there with my Diet Coke and Red Bull like all night long, jet lagged. And Bono is leading like the pub crawl. And we like, I said hey there’s this other pub that we’ve got to go to. We roll into Qualtrics, put the key in and we’re all up in there like, you guys have this in your office? And it was this whole Guinness pub. And so that’s part of the culture over there and we should be learning from that.
Now, Sydney has their own. Seattle has their own. I’m going to Dallas after this. Dallas has their own, right? And London’s going to have their own culture. The key is it’s got to get better and we’ve got to make sure that it still maintains the core values that we have in a company. And that is all set by the leadership that we put over there which is the critical part of this.
Owen Fuller: So maybe just one more question for me and then we can open it up for questions from the group. And that is, you know, I don’t know how you felt when you were starting this. If you felt like there was a community, I know it was a different time. The community wasn’t as developed. I’m wondering if there are groups or people that were particularly helpful for you as you, you know, were beginning to expand internationally? Or was there help you wish you had that you didn’t?
Ryan Smith: Yeah. So when we took funding, one of the reasons why we did, and one of the reasons why we went with Sequoia is because Brian Schreier, who’s one of the partners that worked with my brother at Google and he was the first employee to open up Google Europe and he did it in Dublin. And so like I went over there for the very first time and I was meeting with the head of Google and the head of LinkedIn and the head of Twitter. And I was like, wait a minute. I don’t know whether it’s right to be in Dublin or London or Portugal or where to go, but what I do know is there’s nothing you can’t accomplish from Dublin. I was like, well that’s all you care about right? At least the cards aren’t stacked against you. And that was really, really important as we took that.
I think a lot of people take funding without thinking about the network and the help that these people are going to give you. So when we went through, we had an offer at the time to sell our whole company. It was pretty much go home money. But we said, if we’re going to turn that down, we’d better get founders, everyone’s like hey, those are great firms. No. We want board members who are an insurance policy that they literally can help us out. What’s the point in taking money if you’re taking money from someone who six months down the road you’re further along than they are?
So my board member sits on the board of Dropbox. It’s great. When I can go chat with Drew or Condoleezza Rice who’s on that board or whoever else it is when we need to open up a door. My other board members sold Braintree and Venmo. They just sold Linda.com. They just sold Jet.com. They did Groupon. Having access to that group is what it’s about. So when I think about the Utah market, how do we develop firms or whoever who have access to that group to help the founders? Because it’s great. We all talk to each other.
I mean, I was texting Brad earlier and I talk to Josh all the time. We all talk to each other and we all have our own networks and that’s super helpful. So when I’m thinking about whether to advise a company on when and how to take funding, you’d better be looking, if you’re giving up equity you’d better be looking at someone who’s going to be able to open those doors and is plugged in. Especially, and I’m not saying that Utah’s different than the valley, but a lot happens in the valley. Right? I mean, I got an email from a board member last night saying hey, you know, check out this person we should get on our board. Set up a call today. And I was like, how in the world did you get that phone call? How did you get that setup? That’s not happening, floating around Utah very much, right? And so, we’ve got work to do on that front.
The good thing is we’ve got a great foundation and it’s a lot easier than it used to be. And so, what I’m trying to do also is, I don’t know that I’m the most passionate, but I’m one of the most passionate people about Utah. I wish I wasn’t at times, but I really, really am. And so I want to build Utah. I want to build Utah in every way I possibly can. And so if there’s any chance I can do to help these young folks, if I can offer them, I want to pass along anything I can. If I can open the door, if I can buy your software, if I can do something to help you not make mistakes. Right?
I mean, I just met with a company, a startup that everyone’s talking about. It’s great things. But they’ve already given up 30% of their equity and they haven’t even raised a Series A. And I’m like, you’re dead. You’ve given up more of your company than I’ve sold of Qualtrics and I’ve raised $220 million. Your shelf life is about two gallons of milk. Right? So who is advising you on that? Because you’re going to need a war chest to go forward to be able to scale. And that’s not okay. And if I was an investor in your company I would never want to take that much money, personally. Because all I did was cripple the company. So if we can get these young companies to start to have a war chest, where they can go for a long period of time, I’m 15 years in. And we’ve given up 30%. So you don’t know how long it’s going to take. And there’s not one good company that’s been created, especially in this state, but in the enterprise alone that’s done it in less than what, seven years?
How long has Josh done Domo? What is it? Who’s at Domo, anyone from Domo here? How long has it been? Seven years? Is that right? Seven or eight years? He had the team, the money, the knowhow and he bought a company. Right? You’ve got to have a long runway. Because to do something great it’s going to be hard. And so, that’s a good example. And Josh is not dumb. He knows what he’s doing. So that’s a good example of why equity matters. And then, if you’re joining a company you definitely want to join a company where the people that are hiring you are going to be able to control the destiny of that company. And that’s like, absolutely critical. And so the one thing I can say to my employees is, look, I’m going to be around. Right? I’ll be here. I’m not going anywhere. My wife doesn’t want me at home and this is my last job. So that’s the way it’s going to be.
Owen Fuller: That’s great. With that we’ll wrap up this portion of the meeting. Let’s all give Ryan a big thank you for coming here to join us.
Lisa Christensen: We’d like to thank the World Trade Center Utah for the invite to their event. You can find out more them including trade missions and future events on their website, wtcutah.com. We also covered a panel dealing with more specific issues of going global which you can read on our website, UtahBusiness.com. Tell us what you think by reaching out to us on social media or emailing us at firstname.lastname@example.org. Thanks for listening.