An early investor’s behind-the-scenes look at the rise of Outreach
The relationship between Mayfield partner Rajeev Batra and Manny Medina, the co-founder and CEO of Outreach, started off with a big misunderstanding. Actually, two of them.
The first happened in 2012, when Manny sought Mayfield’s investment in GroupTalent, a recruiting software start-up he had co-founded. After hearing the pitch at Mayfield’s offices, Rajeev was deeply impressed with the first-time CEO’s obvious talent, curiosity and intensity. “He clearly showed many of the signs of a great entrepreneur,” says Rajeev. But all Manny heard was that Rajeev chose not to invest.
Then, two years later, Rajeev cast the deciding vote against Manny’s newly pivoted incarnation of the company in a startup competition put on by the Harvard Business School, their mutual alma mater. Manny’s antipathy hardened. “When I heard how we’d lost, I swore I’d never speak to Rajeev again,” says Manny, a former Microsoft product manager and early Amazon AWS team member. “He was dead to me.”
So a year later in April 2015, Rajeev knew he was in for a fraught conversation when a couple of mutual friends told him that GroupTalent had morphed into Outreach – and was exactly the company he’d been searching for: one that made software to help salespeople be more effective in their outreach to potential customers. When one of them urged him to give Manny a call, Rajeev thought: “Ooh, I’m not so sure he likes me very much.”
Unable to quell his intellectual fascination for anything involving sales and marketing-related technology, Rajeev overcame his hesitancy and contacted Manny. After a somewhat chilly first exchange – they laugh now about how Manny at first tried to put off the meeting for months, before inviting Rajeev to his tiny office – they quickly bonded over a shared belief that Outreach could crack one of the most obvious remaining opportunities in cloud software. Despite Salesforce.com’s dominance of the CRM market, the cloud had yet to revolutionize the daily lives of salespeople.
“The original idea behind CRM twenty five years ago was to help salespeople be more productive, but it ended up being a tool for sales managers that salespeople are forced to use, not because it helps them or they love it,” says Rajeev. What salespeople needed, they agreed, was a tool to help them boost their win rates by optimizing and streamlining their use of communications channels such as the phone, email and LinkedIn. “I’d kept close tabs on sales automation since I worked at Siebel in the late 1990s,” says Rajeev. “It was clear that Manny was approaching the problem in a truly original way that could transform how salespeople engage with customers.”
Five years later, Outreach is the leader in a thriving market called Sales Engagement. Its position in the burgeoning market, estimated to be $30B+, has turned Outreach into a unicorn. The company estimates that fewer than 10,000 companies now use sales engagement tools, compared to a million or so that use CRM to keep track of customer accounts. “This is a 100x opportunity,” says Manny.
And a relationship that began bumpily has turned into a deep bond, with Rajeev becoming a trusted advisor for Manny on everything from the company’s basic business model, to how to professionalize its own sales and marketing strategy. “When you’re growing as fast as we are, you’re always operating way out in front of yourself so there’s going to be some self-doubt,” Manny says. “Rajeev is a great sounding board, so those doubts don’t become debilitating.”
Meanwhile, Rajeev has come to admire Manny’s purposeful, transparent leadership style, and the way he has honed a company culture that is hard-driving yet empathetic. “The real story is about Manny’s growth as a CEO, from a guy with a twinkle-in-his-eye that wouldn’t take no for an answer, into the leader of a company that is changing the world,” says Rajeev.
The anatomy of a founder/early investor partnership
When Rajeev made that call in April 2015, Manny and his three co-founders had begun to pull their company out of a death spiral. With cash running out, they’d created workflow software to help them make better use of digital tools to identify and set up meetings with potential customers for their recruiting platform. When customers began showing more interest in the sales software, they pivoted hard and relaunched the company as Outreach.
With grit and charisma, Manny all but willed the company forward. He landed dozens of accounts by cold-pitching tech executives as they tried to enjoy a quiet latte at a San Francisco coffee shop. “It makes it very hard for people to say no when you’re standing right there,” Manny says.
When Manny first responded to Rajeev’s call, Outreach had just raised a $2.4M seed round for the newly pivoted business and was not in a rush to raise a series A. Still, Manny couldn’t resist making Rajeev sweat a bit.
“We’re a little booked up until after Memorial Day,” Manny told Rajeev. That was more than a month away, an eternity for a VC who thought he may have found the startup of his dreams. Manny ultimately agreed to meet sooner, but insisted Rajeev come up from Sand Hill Road to Manny’s tiny office in a not-so-swank section of San Francisco. “It was really just a desk, two chairs and a table with a TV that didn’t work,” Manny laughs. “I appreciated his persistence. He knew this was not going to be an easy meeting.”
By the end of the 2.5-hour meeting, things had turned around. Manny had given up his boycott of Rajeev. He started contacting the dozen or so CEOs and SaaS leaders Rajeev felt could help the first-time CEO take advantage of the opportunity Outreach had created. That August, Mayfield led Outreach’s $9 million Series A, and Rajeev joined the board.
From startup to “real” company
From the very beginning Manny was tapping Rajeev’s insights about how to scale a SaaS company and expertise in CRM. The Mayfield partner had been an early investor in Marketo, a leading marketing automation software company that had done for digital marketers what Outreach was trying to do for salespeople.
The most obvious place where Outreach needed help was ironically, in finding true product market fit and aligning its go to market (GTM) motion and putting basic financial controls like collecting cash before paying commissions. Manny had cobbled together a less-than-traditional team for a company aspiring to sell to the world’s most sophisticated companies. It consisted of a small group of gung-ho recent graduates willing to work on commission alone–more Glengarry Glen Ross than Silicon Valley. Manny let them set up a sales office amid the shut-down steel mills near Penn State. The average deal size they were closing was just $1,200 and less than two seats per customer.
“You know you can’t build a big company this way, right?” Rajeev told Manny the day after Mayfield became an investor in Outreach. “He told me ‘You’re running this place like a drug dealer,’” says Manny. That was on a Friday. On Monday, after a weekend of worry, Manny called an all-hands meeting. From then on, he announced, Outreach wouldn’t do deals for fewer than 10 licenses.
When sales began to soar, Manny’s instinct was to keep his foot on the gas. But when he told the board of his plan to grow annual recurring revenues for 2016 six-fold, from $2.7 million to $17 million, Rajeev urged him to first ensure the company could give itself the room to learn and build its teams and processes to nail product market fit and understand levers of growth. “What are you trying to prove, Manny?” After much debate, Manny changed the target to “only” $10 million. “As a systems thinker, Manny relies on both data and instinct,” says Rajeev. “There is an obsession with the numbers and not the “why” of the numbers. You want to create a culture of setting lofty yet achievable goals, not impossible ones. This creates a possibility of winning, not one of despair & losing no matter what.”
Building a world-class team & equitable culture
The Outreach culture has always been “team first” and deeply rooted in its values of GRIT, having “each other’s back”, accountability, and customer centricity. To that end Manny has been obsessed with surrounding himself with a great team and advisors he can learn from and be an excellent leader & CEO. From the early days, upon Rajeev’s recommendation, he joined 10XCEO, a peer based CEO coaching group and now counts many world class SaaS Entrepreneurs and CEOs on his speed dial and many who reach out to him for counsel. The company has won numerous awards for being one of the best companies to work for.
Working closely with Rajeev, Tejas Maniar, Mayfield’s head of talent, has helped Manny and Outreach CRO, Anna Baird recruit its CTO, CFO, chief people officer and other key people. Gamiel Gran, Mayfield’s vice president of business development, leverages the firm’s CXO network to connect Outreach executives with people who can supply everything from messaging feedback to customer introductions. Kamini Ramani, Mayfield’s VP of Marketing, secured an invite for Manny to attend an exclusive retreat of enterprise software leaders, at which he met Aneel Bhusri, co-founder and CEO of Workday, who became an investor and advisor to Manny.
While he’s a sponge for learning from others, Manny has an uncanny instinct for talent and people, an important quality in a CEO which is worthy of honing. Most importantly, as an immigrant of Latin/Russian descent he understands what it means to not be from “central casting” and to be overlooked for otherwise suitable opportunities. When Outreach was preparing to hit the gas on its growth plans, Manny insisted the company hire Matt Millen, who had run sales for motivational speaker Tony Robbins before selling business telephone services for T-Mobile. Rajeev was surprised given Millen’s lack of SaaS experience but shared Manny’s belief that Millen’s empathic, emotional style would resonate. Millen ended up taking sales from $5 million to $50 million before Manny promoted another “non-obvious” choice: former CFO/COO Anna Baird into the CRO role.
Vision, mission and purpose
While there has been an incredible focus on establishing and owning the Sales Engagement category, Manny is always thinking bigger, strategically about the future of the market and most importantly what is the purpose of Outreach. Why should it exist and why does it matter and to whom?
The basic thesis behind Outreach – that existing sales tools such as Salesforce.com’s CRM was beloved by sales managers, but not by actual salespeople – was bearing out. Rather than position Outreach as an app that could fit into those CRM platforms, the company has set out to create an entirely new AI driven platform for sales and customer engagement addressing a completely different paradigm. One, where buyers are in control and users of technology are digital natives and remote selling is the norm. It is like providing autonomous cars in a world of horse drawn carriages. That has meant making huge investments in everything from engineering, which is 40% of revenue, to positioning and branding, and it meant “tickling the dragon” that is Salesforce.com.
Above all, Outreach is about using technology to enable salespeople, the true unsung heroes, to solve their customer’s problems, drive revenue for their business and earn a living. When sales people can be empathetic to their customers’ needs, the top line improves efficiently for a company, which in turn allows it to invest and innovate and improve the world. The mission and the “why” of Outreach is simply that and as Manny puts it most people have one big idea and this is it for him!
The pandemic has only served to accelerate the company’s mission with more than 4500 companies running on Outreach. With $289M in total venture funding, the last round even included Salesforce.com’s internal venture group, a nod of acknowledgement from the biggest player in SaaS.
Thinking back on what went right, Manny and Rajeev agree on a few key lessons.
You should choose your investors – not get chosen by them.
Besides Rajeev’s willingness to change his mind and hustle, Manny was impressed that the Mayfield partner truly shared, and understood, his vision. “After working with Mayfield, we never engage with a firm that doesn’t come in understanding the market. If a VC says ‘alright, pitch me your market’, I’ll say ‘no, you pitch me my market’,” says Manny.
If you’re creating a category, don’t try to be too cute. Enter it, embrace it, most importantly own it and lead it.
Outreach began evangelizing the idea of sales engagement software in 2015, but the concept didn’t immediately resonate with influencers and the media. Concerned, the company spent several months and too much effort trying to establish other labels, such as “revenue intelligence management”. Rajeev, who’d seen Marketo go through a similar process before coming back to the original “marketing automation” idea that ultimately led to its acquisition by Adobe in 2018 for $4.75 billion, was among the voices urging Manny to stick with the original plan. “The lesson was to be extremely intentional about owning and leading the category,” says Rajeev. “Especially when your customers and all the players in the market start embracing your original pitch.”
“The first rule of building a category is don’t call it something stupid,” says Manny. More seriously, stick to your guns on the strategic value, and try to create a vocabulary that establishes you as the leader. “Suddenly, after a year, all our competitors are talking about ‘sequences’,’’ which is a key element of Outreach’s product and has been prominent in Outreach’s marketing.
Helping people and cultivating friendships helps cultivate sales.
One thing Manny learned while selling to strangers in coffee shops is that selling is still a very human activity. “If I could get someone to watch our demo, I had a 100% hit rate in getting them to do the trial,” Manny says. And often, those people became personal friends that turned into long-term supporters for the company, as well. Which in turn fueled a grassroots movement for the category and Outreach.
It’s not what you know, it’s what you’re able to learn.
Manny says he was not a natural salesman. In fact, he wasn’t born much of a capitalist. He grew up in Ecuador, where his grandfather was a leader in the Communist Party. He credits his ability to continually adapt to an insatiable curiosity. “My superpower, if I have one, is that I’m unnaturally curious about your business. I’m almost voyeuristic, but it tends to lead to a lot of great discovery calls,” he says.
Rajeev credits Manny for his ability to grow from the hustling first-time founder pitching potential buyers at coffee shops, into a seasoned leader and CEO who combines competitiveness with an insistence on doing what’s right. Whether it comes to hitting revenue goals or on revamping a basic human activity – selling – “he simply doesn’t take no for an answer.”
Of course, Rajeev and Manny don’t agree on everything. Manny still doesn’t seem persuaded by Rajeev’s convoluted explanation about why he wasn’t actually the deciding vote in that HBS contest five years ago.
But they’ve settled into a fruitful partnership in which Rajeev, who has seen some version of whatever Manny’s latest challenge happens to be, provides a patient ear. “When you’re growing as fast as we are, you’re always operating way out in front of yourself so there’s going to be some self-doubt,” Manny says. “But Rajeev is a great sounding board, so those doubts don’t become debilitating.”