In this session, Laurie Schultz, chief executive officer at Galvanize, shares her ten fundamentals for building a billion-dollar company.
When she joined Galvanize as CEO in 2011, it was a forty-year-old on-premise audit software company named ACL that was services heavy. In nine and a half years, Schultz transformed ACL into a SaaS company, rebranding it to Galvanize and selling it for a billion dollars.
Schultz has had a long, extensive history of transforming cultures, platforms, business models, and valuations by empowering change. Prior to Galvanize, she served as a senior vice president at Sage and a vice president at Intuit.
Let’s dive into her ten fundamentals for building a billion-dollar company.
1. The founder transition doesn’t have to be a sale. Consider hiring a CEO that can scale.
Schultz mentions that this is how Galvanize made its transition. The founder moved to the Board. That allowed Schultz to take reigns as the new CEO.
She mentions that the founder invited her to “break all the rules”. She explains that this doesn’t happen often. As a result, she had to approach it in a delicate manner.
One thing that Schultz focused on was building chemistry with the founder. That helped her align with his mission and goals.
Here are six things you need during a Founder transition:
- Know yourself
- Be up for the challenge
- Be careful in your CEO selection
- Commit 100%
- Be prepared to risk everything
- Get the hell out of the way
Schultz describes that in the beginning, there were some challenges—especially among employees. She refers to it as a ping pong match.
You had one-third of the employees ready to grow and do more. Another third appeared tired and burnt out. That last third was watching both sides and waiting to see which side they would choose.
2. Town Halls & Change Agents: The Keys to Changing Culture
She explains that in her first two weeks, she conducted fourteen town halls. Her primary focus was to find out what was working and what wasn’t working.
Their mission in 2011 was to become the most trusted billion-dollar software company. She admits that most people in the company didn’t feel they had authored that goal.
As a result, she had to recreate belief. Through town halls, she invited employees to become change agents. She invited them to become authors in the company’s destination.
Through town halls, she was able to identify the company’s change agents. She used them to help change the culture from the inside out.
Schultz states that leaders create a future that otherwise wouldn’t happen by:
- Embracing the unknown
- Making promises that they aren’t sure how to keep
- Living up to their word
During the town halls, she was able to identify the change agents in the room. She used that to figure out who could help lead the transformation.
When selecting change agents, she didn’t care how long they had been with the company or what department. Instead, she focused on the content of their character and their ability to accelerate change.
Once she found her change agents within the company, she put them in charge of the transformation. Then she got out of the way.
She identified six people within the company and had them build the roadmap. Whether it was right or wrong didn’t matter. What mattered is that she had buy-in from her change agents. They were authoring the path, and the path could be course-corrected as they went along.
Another thing she did was make public the top five to ten percent of the company described as change agents. Those individuals received more equity in the company and had direct access to her. She also created personal development plans for their growth.
It is this philosophy that helped her transform the culture at Galvanize from the inside out.
3. You have to build a moat
What is a moat? It’s a key competitive advantage that sets you apart from your competitors. It makes you tough to catch and helps you build an enduring business. It also aligns with Schultz’s third fundamental of building a billion-dollar business.
Schultz explains that to build a moat, you must:
- Make clear your distinct competitive advantage
- Be overt about the investments you make to expand your moat over time
Galvanize’s competitive advantage was being the only true multi-tenant platform in their space. They were also the only platform in their space with data automation and global scale. That allowed them to reach more than 7,000 customers and hundreds of partners in 130 different countries.
Here, Schultz concludes that global scale, data network effects, and ecosystem creation are a few ways to build a strong moat.
4. Create a one-page strategic plan that encompasses your vision
Schultz explains that their one-page strategic plan was the most powerful document at Galvanize. It’s a tool to corral the emotion and intellect of a large group of people across the company including the front line, C-suite, everywhere in the middle, and the board. It refereed who we hired and where we invested our time and money.
The one-page strategic plan lays out a company’s:
- Total Addressable Market
Additionally, it also states the three specific priorities for any given year. Although these priorities change from year to year, they sit within three categories:
- Mobilizing talent
- Customer experience
- Business model
The above order of priority is important. If you have amazing employees and culture, they will create an amazing customer experience leading to a great financial outcome.
Too often when new CEOs join, they start with the financial re-engineering of the organization. But if you can get the culture and customer experience right first, the financial outcome follows.
For Galvanize, the one-page strategic plan became essential during the hiring and when making considerations for investments. Having this type of guidepost was invaluable to staying the course.
5. You must have a compelling picture of your total addressable market
It’s your second most important piece of paper.
Schultz explains that if you look at their growth in the first few years after she joined, there wasn’t much of it it.
That’s because they were using that time to focus on their culture. Additionally, they were trying to create employee buy-in. Last, they were mobilizing their change agents within the company.
That takes time. Throughout that time, though, they had a clear vision forward and what they wanted to do to get there.
Part of that culture was focusing on Galvanize’s $41 billion total addressable market (TAM). They segmented their TAM by product, buyer, and geography.
Moving from a service model to a software model gave them more flexibility in the market. For instance, one billion of their TAM was their old audit market. With new markets, they added $40 billion to their TAM.
Their TAM also influenced decisions when it came to build (R&D investment) vs. buy (M&A strategy) to gain velocity.
6. You must have a playbook
Schultz shares that their playbook to a billion-dollar company had these six traits:
- Business model
- Global go-to-market
- Branding (or rebranding)
- Mergers and Acquisitions
7. Separate the Kernel From the Chaff
It took Galvanize 9.5 years to get to a $1 billion valuation. Shultz reflects how they could have done it faster.
One piece of advice that she gives is to be clear on how you segment the market and what type of customer you want to drive your valuation. Resist the temptation to pick up off strategy revenues. You’ll regret it later because those can drag your averages down.
Shultz explained that if you chase all the small things, you won’t have enough in the jar for the big things. She states that she spent a lot of time “exiting” revenue lines and customers due to mistakes here.
When thinking about expanding your TAM, you must be strategic. When expanding the TAM for Galvanize, she would look at specific factors first to make an educated decision on whether it was worth it:
- What is the churn rate in the geographic location or market?
- What is the average lifetime customer value?
8. $1 Billion Heatmap
Schultz explains that if $1 billion is your goal (or anything like it), you need to be clear on the route to get there. From the beginning, her mission was for Galvanize to be the most trusted $1B software company.
She recalls, at that time, nobody believed it. Our employees back then didn’t author it, and we weren’t making the right investments to achieve it.
That, of course, changed given our playbook. Shultz explains that the $1B heatmap kept them honest about timing and gaps.
It covered not only the obvious financial requirements but also things like:
- The capability of our C-Suite and Board
- Our market share
- The customer experience
- The size of our TAM
- R&D investment vs. M&A strategy
- The consolidation of our codebases
- The exit of non-strategic revenues and customers
Another thing Schultz mentions that is crucial to have is an excellent chief revenue officer (CRO). A CRO’s role is to look at ways to generate and retain revenue across multiple product lines and channels across multiple geographies with a long-term perspective, rather than a short-term horizon. She mentions that their CRO was instrumental to their $1 billion heatmap. He helped them scale the business without breaking the culture.
Ultimately, the heatmap helped them envision the road forward. That was key to Galvanize’s success in reaching its goal.
9. You need to have a Board
Schultz shares that the person that helped her with the $1 billion heatmap was an independent Board member. He was someone from their industry, had been a founder and CEO, and is now a successful investor.
She explains that if you don’t currently have a board, you should consider getting one. Here are reasons why she feels having a Board is essential:
- They hold you accountable
- They bring discipline
- They bring a lot of experience
- They can be a sounding board
- They can offer a reality check
- You’ll learn from them
She adds, having a diverse Board adds a ton of value and experience when it comes to decision making and offers you a broader perspective you wouldn’t have if they weren’t there.
10. You must court investors, bankers, and strategics
Schultz explains that it’s far better to have long-standing relationships. In that way, you don’t have to pitch for capital when you need it.
She says it’s important to take calls. It helps maintain relationships for investments and capital in the future.
She adds that it’s important to have a clear destination. It’s also important that your relationships align with that vision.
She explains that this long-term approach paid off for them. It gave them a lot of flexibility. She states she was very upfront with investors, bankers, and strategics.
She made a point of saying what she planned to do and then doing what she said. Keeping the lines of communication open showed they could follow through on plans.
It made the company more credible when it came time to seek capital. She believes that credibility contributed to their courtship from investors, bankers, and strategics.
It made it easier because they weren’t starting from scratch.
We hope this article helped you recognize the qualities of great leadership and key business fundamentals as you strive to build a billion-dollar business yourself.