 Okay, we're back. This is Dave Vellante, wikibon.org, and this is theCUBE, where we go out to the events, we extract the signal from the noise, we bring you the best guests that we can find, we like to call them tech athletes. I'm here with my co-host, Jeff Frick. Doug Leone is here, he's a partner at Sequoia Capital, very well known VC, on the board of ServiceNow. Doug, welcome to theCUBE. Thank you, great to be here. It's great to have you here. You know, a lot of times, venture capitalists, they'll get in, they'll help seed the companies, help grow the companies, go to an IPO, successful IPO, and kind of go on to the next one. So you're here, and you're seeing the growth of this company, the meteoric rise, and you're seeing this user conference. You must be delighted to see the degree, the enthusiasm of the user base. It's very exciting. It's very exciting to be here and see close to 4,000 people being here, and hearing some of the feedback from the customers. It's horrific. So how is it that they've been able to keep you interested in this journey, and you're still here, you're helping grow the company? Well I think the short answer is that the job is not done yet. We are in the early innings. If one thinks about IT service management, we're well in our way. But one thing we learn from the conference is that customers are finding many use cases for the software. And the software is spreading in IT, in HR, in many other areas. So I actually think we're in the early innings. And so I think there's a great deal of opportunities for the company, and I would like to very much try to help in garnering as much market share in that opportunity as we can. Yeah, you've been around the technology industry for a while. Why is it, do you feel that IT is now ready to change? Well, I think IT is ready to change for the simple reason that the world has changed. If you think of IT maybe four or five years ago, essentially what the role of IT was, a defensive role to protect the enterprise, and the employees and the technology were enclosed in four walls, and a little bit on the attack side, where no was the first answer and yes was the other answer. And they work mainly in infrastructure. I think that is the plumbing. Well, suddenly the role of the CIO has completely changed. The defensive part of the house has become much more challenging. The technology's out of the building and the employees are out of the building. So that requires a lot more skill set and it's way more exciting. And the plumbing side of the house has completely changed where the CIO is no longer the plumber, he's a business partner. So his role has been elevated within a corporation. And I think it's the most exciting time to be a CIO in the history of CIOs. So I think that the future is very bright for this market segment. Lastly, for the very first time, the IT function touches every employee in the company. And so there's a lot to be done for every employee. We talk a lot on theCUBE about the whole hyperscale trend and my colleague John Furious says, if you want to know what's going to happen in the enterprise five years from now, go look at what's happening at Google and Facebook and Amazon. And you remember after the dot-com crash and Nick Carr wrote his famous book, does IT matter, everybody just pull back, like you said, got defensive. But the hyperscale crowd showed us that technology actually can be used to create competitive advantage. Nonetheless, a lot of traditional IT has continued to be defensive. Do you think that platforms like ServiceNow can actually change that mindset and bring IT back to being a competitive advantage and also importantly, catalyze increased spending within IT? Well, I actually would take it one step further. I think that companies like ServiceNow offer a product that are extremely necessary for IT to change. I don't think it can be done without a service now. For the very first time, we have employees that can create applications on the fly. They can create application, many applications that talk to one another in the single type of a data model. Therefore, the ERP for IT. And instead of the end users having to wait weeks, months for any changes, that can be done very quickly, very overnight by a user. So I think having learned a little bit from Amazon and from Google in the expectations of the end user within a corporation, a company like ServiceNow now offers a solution where companies can make those kinds of changes and build those kinds of systems very, very quickly. So Dago, I wonder if you could talk from, step back from kind of a VC perspective where we saw a few years back tremendous investment and valuation creation in Facebooks and Google of course and a lot of consumer facing buzz, Zanga and this and that. And now it seems to kind of have shifted back to the enterprise side. But I think what's interesting is how the consumerization and those applications both in infrastructure as well as user experience seem to really now be influencing where the enterprise side of the house is going. Can you speak to that? Sure, please keep in mind that the business of investing in these small companies is a business of latency. If you invest in one year, products don't hit the market for two years later and consumer adoption is three or four years later. And unfortunately the venture industry tends to run with momentum investing. So 50,000 venture guys do consumer, 50,000 venture guys do infrastructure and IT. I think the good investors have seen some of these trends just begin to evolve four or five years ago and you have to be quite consistent and be true to your vision. If you start coming in to companies in infrastructure right now, one could argue that you're investing at a local maximum maybe four or five years ago. But unfortunately the investment industry is a momentum driven industry for most investors. And you know, the thing that happens with momentum, you're always a little late and paying the highest price and then the moment that you get there that you see a peak. So I think the trick is to have careful market maps, have a clear vision, and then have Dumbo-like ears available to listen to guys like Fred Luddy. So when you run across them and they have a crystal clear vision in the future you're ready to jump on for the simple reason you've thought I had and maybe it was one of your veins of your market maps. What was it when you first talked to Fred that really struck you? What was the piece of his vision that resonated? I think two or three things. One, he was crystal clear in what he wanted to do. And the great founders are crystal clear because they are great thinkers and they spend all the time thinking. And therefore when you spend a lot of time thinking then what you can do is articulate in very few words. Second, Fred knew exactly as the founder of the company what his strengths were and what his strengths were not or his weaknesses were. And he asked some of his trusted friends, investors and colleague to help him find people to show up the other side. And third, he just told it like it is, no surprises. As a matter of fact, for every board meeting we went to for the first year and a half the only surprises we got was surprise on the upside. And I will tell you that never happened. Tug, you have said that the next big thing in enterprise IT really doesn't exist. You're telling us now your philosophy is somewhat non-contrarian. Most VCs, like you said, are out chasing a trend. They're trying to focus on momentum. So talk about that a little bit. If there is no next big thing in IT how do you decide what to invest in? You said you have these market maps. Talk a little bit about that philosophy. So I think what I really said is that there's no way we know what the next big thing is. As a matter of fact, if I could articulate what the next big thing is I'll tell you it is not the next big thing. As I said earlier in the presentation the day before we met Fred Luddy if you had asked me that question I would not have told you IT service management is the next big thing. It took Fred to come in and explain to us why that was going to be a market opportunity and we jumped on it. So if we make 10 investments, four or five fits some kind of market map. It's an extension of the world we know mobile is going to penetrate. I can tell you the real exciting investments are the ones where no one's paying attention and someone like Fred Luddy can see the future. So yes there's going to be next big thing is going to be wearable computing is going to be Google Glass who the heck knows but there's going to be a founder and entrepreneur that's going to explain to us here's an application for Google Glass you haven't thought of that's going to make it very clear why we want to chase that and not just wearing a pair of glasses. Mark Andreessen was on CNBC yesterday talking about the perils of public companies and basically while it was somewhat self-serving I tended to agree a lot of what he was saying I mean the barriers for a public company are now so high but now here you are with service now what's that experience been like taking the company public? I guess if you're always beating on the upside that helps but there's eventually going to be some bumps in the road so what's your opinion on the whole public market and what's your stance on that? Well the position I have is that it's better to stay private because you can do a lot more so there's only two or three reasons to go public one is a branding event your competitors will say oh it's a small private company they're running out of cash and so on since your financials are not public some customers may tend to believe it second is to finance a company although one thing I'd argue is that if you've got a great investment there's lots of money whether you're private or public and third is to provide some liquidity for employees unfortunately the liquidity for them is not something that happens overnight you know one day you go public the next day is not the day that you sell all your shares and so it really comes down to a branding event and our position is keep companies private until they get very strong practice for a year or so onto what it's like to be public have your financial house in order then go public and always start with a no first and move the weight towards a yes because the IPO is simply a day in the life of the company as you're trying to build a great business it's not the other way where you go public let's all go public for the heck of it so start with a no justified to a yes your life was changed and you better have control over your forecast your financial systems and so on prior to being public yeah so service now obviously New York Stock Exchange selling to the global 2000 the biggest companies that had to help from a branding standpoint it helped a lot because all the fight in the business or in the market that was spread by our competitors we're not financially viable well I think the whole world sees that we are way more than financially viable all that junk that a local salesman is going to say against another local salesman in a heated sales situations it's completely out of the market because now what you're dealing was with facts and we knew that our facts were way better than our competitors facts well there's some ancillary benefits too it wasn't the motivation for going public but prior to going public cash flow was king and you had to invoice a certain way and now you've got hundreds of millions of dollars in the balance sheet and so you're able to it gives you greater financial flexibility as well yeah we had cash flows as a private company and as a public company it's not that if you have a lot of cash that you can spend it for the heck of it you have to justify a model why doing so is the right thing cash is always available if you have a terrific company there's people that are willing to throw cash in bucketfuls at you so it's not cash we talked, it was interesting to hear Frank today talking about Facebook he went public just after the first major IPO and technology right after Facebook he called it the face plant IPO tongue-in-cheek but then of course you had work day as well and you guys seem to be more work day like you know kind of similar transformation even though you're going to IT is that a fair comparison? Yes I think it's a fair comparison is that it's two fabulous SaaS companies you know about six months ago if I asked someone what's the great the second greatest company in the SaaS marketplace nobody could name it Salesforce nobody knew number two now people know it's Salesforce it's work day and it's service now it's a fair comparison I think that both companies have a very long-term market opportunities and I think both companies have stand-alone possibilities have the possibilities of being large and stand-alone companies for many years to come So Sequoia obviously great firm you know one of the leading venture capital firms in the west coast in the world what sets Sequoia apart? We've been in business for 40 years and we've been on top of our game for 40 years or on top of the business I hate calling it a game We tend to high We do high sports analogies here that's okay No there's dangers with sports analogies because the moment I mentioned team and a sports team there's only room for five people on the basketball team who starts and that's Sequoia if you've got 10 people we're skillful we have room for all 10 of them so I'm always a bit leery of the sports analogy but it's the culture of people that came from humble beginnings who have a deep-rooted need to win who have good business instincts who are willing to learn and who are willing to be business partners and that's a key set of words business partners to founders to help them build a great business over the very long term You've spent some time in business development and sales over the years How has sales or has sales changed over that time frame? Some things have some things haven't I remember 15 years ago, 20 years ago where you could not get to what we call the SMB the small businesses because the cost of sales was too expensive now due to telesales and the internet that you can get there but there are some things that have not changed if you've got a sales force they should be very well paid they should not have a high base they should be able to make a ton of money sales leadership should come from a former sales person so some things have changed and some things are deeply rooted in the DNA of a sales person and may never change All right, Doug Leone, we're out of time but one last question is we're observers of service now outside observers what should we be watching for what are the things that you would ask us to pay attention to? Watch how deeply ingrained throughout the many departments of a company the service now software becomes not just for IT service management but for a variety of applications written by employees of that company for the benefit of that company All right, Doug, thank you very much really exciting to have you on theCUBE great job, congratulations like you said, you're not done yet so good luck on your future journey it's really a pleasure Thank you, thank you very much All right, everybody keep it right there we will be back with our next guest this is Service Now's Knowledge Conference I'm Dave Vellante with Jeff Frick this is theCUBE we'll be right back after this short break