Dheeraj Pandey Wants to Change CRM. Can He?

Kara Miller:

Welcome to Instigators of Change, a Khosla Ventures podcast, where we take a look at innovative ideas, the people who come up with them, and those who invest in them.

I'm Kara Miller, and today we dive into the world of customer relationship management, CRM, and a man who walked away from a multi-billion dollar company.

Dheeraj Pandey:

I realized that the support department and the marketing department just have shared nothing in those 10 years that I was operating the company. I felt like shooting myself in the head. I'm like, "Wow."

Kara Miller:

Dheeraj Pandey talks about starting again. In a world dominated by tech giants, how easy is it to avoid getting stepped on?

Dheeraj Pandey:

Large companies end up gravitating towards richer customers, larger customers. Then, disruption really happens from below. I think it's the base of the pyramid that starts to get disrupted.

Kara Miller:

And, Pandey explains what he believes gives you an advantage in building a business.

Dheeraj Pandey:

We've stopped emphasizing reading, writing, and teaching. A lot of creativity is really copying from some other industry, or some other realm of life, that you bring here. That's also innovation. You know?

Kara Miller:

That's just ahead on Instigators of Change. In 2009, at a moment of huge economic stress, following a housing collapse and a year in which the stock market was roughly cut in half, Dheeraj Pandey co-founded the cloud computing company Nutanix. By 2013, it was a unicorn worth more than a billion dollars. By 2020, after more than a decade growing Nutanix, Pandey decided, once again, to start from scratch with DevRev, a company hoping to bring software developers and customers closer together.

Dheeraj Pandey:

We are a work management software for developers, product managers, and support engineers. We feel like if you can really make them come together, and we don't have people who are just passing the baton, that's their... We have tons of managers in the middle whose only job is to pass the baton from one department to another.

Kara Miller:

Pandey notes he has worried about the widespread lack of communication within companies. What he's hoping to do, here, is stitch people and tools together so they're actually sharing the information that matters. He says he once saw a video on YouTube. It was from Bain and Company about what they called founder's mentality, and its message has stayed with him.

Dheeraj Pandey:

It talks about a paradox that growth creates complexity, and complexity is the silent killer of growth. So, what you really vied for is the thing that's going to kill you. I'm like, "That's profound. That's unbelievably profound." You know? How you really work to simplify is probably the hardest thing in building a business. It comes to people's calendars, and their day-to-day stuff they do. We need to really work hard to simplify, and it takes a lot of energy to simplify. If we do our job right, here at DevRev, we would've done that, at least to bring people together, showing them a true north of the end user, and the product, to say, "Look, we all work for one, and that's the end user."

Kara Miller:

But, starting a company in the middle of a pandemic, and now, two years on, in the midst of a lot of economic turbulence, it's not easy. That is true across the board, almost no matter what sort of business you're in. Though, it's also true, the last two years have broadened Pandey's way of thinking. Possibilities have opened and actually the nature of business has kind of changed.

Dheeraj Pandey:

Entrepreneurship is all about the bird in hand principle. You do the best with what you have in your hand, as opposed to worry about what you don't have. Also, in other ways, we've realized, with COVID and everything else, that remote work has become par for the course so a lot more stuff is happening across the world. The world is flatter, all of a sudden, in the last two years. We are really looking at this as an opportunity. Necessity mothers innovation and invention so these constraints are making us think in more creative ways than before.

Kara Miller:

So, let me actually sort of draw that out a little bit. How does launching a start-up in 2022 differ from starting up Nutanix? How are you different, and how does the environment feel different to you?

Dheeraj Pandey:

Yeah. I think the biggest change has been around the commerce side of things, the go-to-market side of things. Last 10 years, the world of software distribution has changed dramatically. When we were shipping code to 20,000 customers across maybe 30,000 sites, it was a very different velocity of code refresh, and maintainability, and servicing these accounts and sites, and so on. Now, all of a sudden, there's a few very canonical deployments in the cloud that we control, when to upgrade, and how to really keep it up and running. A massive change in the last 10 years around, "How do you really deliver your value?" Rather than giving it to them, you actually take care of all that, as well. That means that the commerce around it has also changed. You know? You're not just having reams and reams of people going and doing the selling and marketing. A lot of it is actually shifted left into the product just like it used to be with the retail companies, the E-commerce companies, where there was a website, and there was the end user, and then, there was some digital marketing along the way.

I think B2B is changing, dramatically, where a lot of things are actually being shifted to the product. I think there'll be a hybrid version of this for the large enterprises. I think digital is the name of the game in B2B now, which just didn't exist 10 years ago. In some ways, I think the profile of companies have changed. SaaS, as we all know, is now the way you really build the business model. People worry about new things now, subscription, and churn, and nutrition, that we didn't talk about 10, 12 years ago. In terms of technology, I think what has really changed is the pillar around, obviously, the cloud engineering piece, and what it means for compliance, and privacy, and security. I think that's been a big change.

The advent of AI is both an opportunity and a challenge. On one hand, you let machines be more intelligent, and have them come and recommend, and do suggestions, and do things that otherwise you needed a lot of manual labor for. In other ways, humans also have to accept these recommendations. So, what's the design element of this? There's a yin to the yang of AI, which is design, which, I think, is a thing that we actually look forward to this decade, too.

Kara Miller:

Let me ask about that a little bit. You talk to different people about AI, and you hear different things. Some people feel like it's progressing really quickly in certain kinds of ways. I also think that there's an argument that maybe it's progressing quickly in a university, in a lab somewhere, but that doesn't mean that it's being adopted with quite that kind of speed. Tell me just what you see. How quickly do you see things changing?

Dheeraj Pandey:

The last five years for sure because of the compute power of the cloud, there has been a lot of invisible AI that's gone on. I think the best AI will be invisible. We don't have to really call it AI if it's just a smarter software, more intelligent machine that's able to predict and be proactive with humans. Their job is to really assist humans in many ways, in their business processes, and their day-to-day activities. I feel there are fields of AI. When you look at what it used to be 10 years ago, all about computer vision. Now, there's a lot of things around natural language and-

Kara Miller:

Right.

Dheeraj Pandey:

... generative text.

Kara Miller:

Right.

Dheeraj Pandey:

I think there's a lot more complex AI that people are, now, really scratching the surface of in the last couple of years. I mean, in our field for example, when it comes to things like customer support and software engineering, there'll be a need to really elevate people, support engineers, and product managers, and developers, to really go do bigger better things, and leave the repetitive stuff to machines. So, we see a big opportunity around language, around text processing, that just wasn't possible 10 years ago before cloud.

Kara Miller:

I think that's one of the really interesting questions, the degree to which AI will displace people. That's also one around which there's a lot of disagreement. Clearly, we see a very low unemployment rate. So far, when I see the hiring practices over the last couple years, a lot of big tech companies have added tons of people to their payroll. It does feel like, at least so far, as you say, maybe it's just that humans are getting kind of kicked up the ladder. It's not that we don't need them, but the nature of what they do is different.

Dheeraj Pandey:

Mm-hmm. Yeah. I think the next generation is more attuned to this, that they don't have to do the chores that the previous generation used to. In the current generation, there'll be some dislocation, and maybe, saw that with manufacturing in the last 20, 25 years. There is definitely angst that comes with it. You know? You can see the Midwest belt, here, which, for all the right reasons, complaints about lack of reskilling, and all the jobs going out of the country. I think some of that will happen in the white collared world, as well. The next generation, I'm pretty sure, is actually going to be ready for it because they're just being trained differently than the last one.

Kara Miller:

You have talked about how our attention spans have gotten shorter. That seems, on its face, right. Without the data behind me, it still seems right. You talked about how cycles of creative disruption go more quickly. Explain that to me, and what you're seeing. I mean, I feel like that factors in a lot to this question of, "What's the space for new companies?"

Dheeraj Pandey:

We are moving away from large deals. For example, in the enterprise, they're moving towards shorter contracts with subscription, and even shorter metering and billing with consumption. The fact that you only pay for what you use is being metered by the second, or the minute, not by a five-year contract. That is keeping companies on their toes because now they have to really deliver honest software and value creation that is actually measurable, as opposed to what it used to be five years ago. I mean, last three, four decades of IT have been about waterfall decisions, big decisions once every five years. I think that's here to stay, even in the consumer side.

We used to have a landline for decades, like 30, 40 years ago. Now, we replace phones every year. We used to own music, own songs, whether it was CDs, or even on our Apple Music library. Now, we just stream it. So, I think this is here to stay, and that means that companies have to do a lot more to really retain their customers. There's an element of this around engagement, and advocacy, that-

Kara Miller:

Yeah.

Dheeraj Pandey:

... is just unprecedented. That's never been heard before this last decade, of what we have been thinking around subscription, and consumption, and everything that comes with renewals, and churn, and nutrition.

Kara Miller:

So, that sort of churn and attention to the customer, does that make big companies more vulnerable? There's also quite interesting academic research that shows big companies are very good at using the technology. They have the money. They have proprietary software to protect themselves from these smaller incumbents.

Dheeraj Pandey:

They choose their comfort zones. Large companies end up gravitating towards richer customers, larger customers-

Kara Miller:

Okay.

Dheeraj Pandey:

... bigger dollars spend. Then, disruption really happens from below. I think it's the basic pyramid that starts to get disrupted. By the way, this is the way religions are formed, too. When religions become religions of kings, is when new religions emerge for the poor. That's just as much true for technology, as well. The large software companies, today, they have really figured out that they can't do a lot of innovation, and a lot of high velocity, new product development disrupting themselves in the SMB, the start-up world, or the mid-market world. They just gravitate towards the larger customers because these larger customers are just more stable. I mean, you can see this in wealth management and just risk averse customers that these larger companies tend to gravitate towards. I think it's just the way any industry evolves.

Kara Miller:

Can you tell me the story, as you see it, of who your customer is at DevRev, and what problem it is that you are trying to solve?

Dheeraj Pandey:

Mm-hmm, mm-hmm. The metaphor that comes to mind is this game of the Chinese telephone where you say something, and then there's seven layers, eight layers of people. Then, finally, when it reaches someone, it's completely contorted and distorted. That has been true in IT and tech for the last several decades, now, where what the end user wants and what the makers, which is developers and product managers, are trying to do, pulls apart.

Kara Miller:

Okay.

Dheeraj Pandey:

Then, you have layers of translation, and that just gets lost in the middle. I think, what's required is a collaboration platform, where end users, support engineers, customer engineers, product managers, developers, are all coming together. You know? We saw a semblance of this with Slack, but it was all for internal communication and collaboration, to take it to the level where you were able to talk to this at scale with your customers, but also not just in a chat like fashion, but more in a structured fashion. These things that you're doing are channels, but they have ownership, and SLAs, and deadlines, and commitment, and prioritization, and attribution. All those things matter when you're delivering value, and running a business. So, really bringing a lot of this collaboration, and bringing it across end users, the internal engineers, and the developers, and product managers within, that's basically the story of DevRev. We feel like we need to converge all this stuff together, rather than really have divergent departments that only deal with their side of things.

Kara Miller:

What was it that made you think, "Yes. There's a company, here. There's a pain point that needs to be addressed, clearly. Now, I'm realizing it."

Dheeraj Pandey:

This epiphany came to me in my last company. We were spending almost a billion dollars a year on sales and marketing to get to a billion six, a billion seven, in annual revenue. Almost a quarter billion dollars of that was marketing. I was sitting in a meeting, and I was... We were building new products, and we wanted to really send this a promotional email to our end users. I realized that the support department and the marketing department just have shared nothing in those 10 years that I was operating the company. I felt like shooting myself in the head. I'm like, "Wow."

Kara Miller:

They shared nothing with each other.

Dheeraj Pandey:

On the contact information, and end users, and-

Kara Miller:

Okay. I got it. Got it.

Dheeraj Pandey:

I'm like, "Wow. What does this mean? We've run this business. We've made $6, $7 billion in lifetime revenue. We have such large customers, and we just don't know how to market to our end users. There's no marketing workflow that really sends things to end users." That's when this idea that, "Look, we have really compartmentalized companies into departments." If you look at any tech company, they build software, they operate their business-

Kara Miller:

Right.

Dheeraj Pandey:

... in the cloud. Then, they go and support their customers, and they grow their business so build, operate, support, and grow. They all have their own tools, but nobody knows the end user. Nobody knows what they use, what they don't use. There're tools galore that try to give this little bit of information to a product manager. There're tools for support that developers can't log onto. There's tools for developers that support can't log onto. There's tools for growth engineers that no one else can really have access to.

The way we really went about doing this was more physics, physics, physics, physics. Now, there's a need for chemistry where everything is coming together because the end user has a very short attention span. So, they need to be retained. They need to be delighted. They need to be engaged. They are the epicenter of all things business. So, this is why we feel like CRMs were built for departments, like sales CRM, and marketing CRM, and support CRM. Now, this Dev CRM is really an integration. It's the chemistry of all of this together because what really matters is the end user and the product.

Kara Miller:

I know that DevRev does stuff with Slack, and it does stuff with email. I remember, a couple years ago, talking to Cal Newport, who has written very compelling stuff about being able to focus, and about the distracts of email. It just occurred to me that one of the trickiest things for people in doing their job, as you know, is you've got all these bits of communication coming at you at the same time. You're probably trying to focus on something else, but you've got email that you're checking every few minutes. Slack is more instant, and you have people filing tickets. It feels like if you were trying to design a day, it's a day, currently, that's just been designed in this crazy, insane way, that doesn't maximize what people should get done.

Dheeraj Pandey:

No. You're right. I mean, we are on a treadmill, right now. With remote work and Zoom meetings, it's probably even getting worse because you don't have the luxury of just wondering, letting your mind wander a bit, or do creative things. That's why developers complain about deep work, and what-

Kara Miller:

Right.

Dheeraj Pandey:

... flow means to them. I'm sure most creatives do it, not just developers, designers, and product managers. Every creative, actually, bemoans the loss of deep work. I think, this is where machines need to come in. Maybe, we start speaking of AI. We're not there, yet. There's still a lot of English in our business transactions, and that needs to be processed. Natural language processing is still... I mean, our customers tell us, "Please tell us what's trending, what's heating up, what we really need to build." All of that is in English.

So, I think we are upon some things, this decade, where machines will have to help. I think we are barely scratching the surface. The first thing we need to do is make it delightful, make it inexpensive, make it accessible, democratize all data to everybody so that you get rid of the politics that, today, exist because only a few have access to information. Then, information is power, and power brings politics, and control, and everything else. So, if you can democratize things, we can reduce the burden of proof on people. I think it's the first step. Then, machines will have to kick in because there's so much data, there's so many customers, and there's such little time.

Kara Miller:

So, obviously, you are marketing to businesses, but those businesses, at the end of the road, there, they have individual clients. What do you think you've learned about how the consumer has changed in the last, say, decade? Do you feel like there's been big shifts that are notable to you?

Dheeraj Pandey:

The biggest one, we've given it very analyst speak, we call it PLG, or product led growth. The biggest change is top-down decision making in IT, which we call the buyer. The buyer used to push things down because it was a buy and try phenomenon. "Buy first, and then we'll try it, and we'll see if we bought shelf, there."

Kara Miller:

Okay.

Dheeraj Pandey:

Now, it's really grassroots up. It's try, then buy. The decisions really move to the doers, to the technologists, to the individual, to the consumer. They've given it a fancy name called product led growth, but the idea is consumer-grade thinking in the enterprise. How do you really go delight the end user first, and build this army of people that, then, your sales people can go and say, "Look, your army of people love us already so let's talk about-

Kara Miller:

I see.

Dheeraj Pandey:

... formalizing this whole thing."

Kara Miller:

So, you're talking product managers, engineers, whoever, they're saying, "We should try this thing. It's great."

Dheeraj Pandey:

Yeah. Products are not as heavyweight. You don't have to commit to a million dollars, and do a proof of concept for nine months, or a pilot for that long, because you're not shipping hardware. It's not a thing like that. You know? It's basically something that you can try. There's the freemium model which you can take credits, and work on that for a few months. You can swipe a credit card. All the things we did with retail and E-commerce are actually coming true in B2B, as well.

Kara Miller:

Let's talk, for a minute, about problem solving. Whether you're doing a start-up, or you're in the middle of a company, somewhere, near the top or nearer to the bottom, just give me a sense of qualities that you think... If you are thinking about yourself, either getting a company launched, or pushing things to the next level, what are qualities, and this may be through hard-won experience, that you feel are really important that we don't give enough credit to?

Dheeraj Pandey:

We've stopped emphasizing reading, writing, and teaching in a business set-up. Very few people do deep reading, or even just good reading. A lot of creativity is really copying from some other industry, or some other realm of life, that you bring, here. That's also innovation. You know? We have stopped reading in our business lives. We have stopped writing, by the way. I love this new thing called Notion, that helps you organize your thinking. Because they've done it very beautifully, you can, now, get rid of some of the writers' blocks,

Kara Miller:

Hm.

Dheeraj Pandey:

... as well. Reading, writing, and, finally, teaching, I think we are going younger and younger in demographics, even in tech and engineering. When you teach is when you learn the most, as well. I feel like these three qualities have been lost in B2B, just in business building at large.

Then, the things that we don't really give enough sort of credence to are breathing, sleeping, and smiling. It's such a difficult thing. You're waging a war against incumbency in a underserved market. The thing that'll really keep you going is your emotional balance. You know there'll be daily highs and lows. You lose people. You'll gain people. You lose customers.

Kara Miller:

Right.

Dheeraj Pandey:

You'll gain customers. There'll be all sorts of things happening on a daily basis. You have a family. You have to come and figure out how to just have peace at home, and be happy at home.

Kara Miller:

Yeah.

Dheeraj Pandey:

All this stuff is so paradoxical. The only thing that you can do is to figure out how to be emotionally balanced. For that, at least, I try to... Even in meetings, when I could blow my top off, I'm like, "Okay. How do I breathe more, and how do I..." Obviously, sleeping helps, too. That's a great healing process for most entrepreneurs, and even just people working for smaller start-ups. Finally, I think smiling. It just releases hormones that will be good in meetings, too. You know?

Kara Miller:

It's so funny. Two follow-ups. One is, we were talking, not that long ago, to Ethan Mollick, a professor at Wharton at UPenn, and a real guru on research around start-ups. Boy, when I asked him a similar question like, "What can start-up founders do to gain an edge?" Sleep was a major answer. He just said, "People tend to value, oh, people who don't get any sleep." That's exactly the opposite. You have better ideas. You're more able to discern between good ideas and bad ideas, when you've had enough sleep. So, it's so interesting to hear you say that.

Dheeraj Pandey:

No. I'm a big fan of Matt Walker, as well, Why We Sleep.

Kara Miller:

Yup. Yeah.

Dheeraj Pandey:

Also, James Nestor. He wrote really good book on breathing. I feel like these are the kind of things that become your competitive advantage when you're really waging a war.

Kara Miller:

Then, I want to come back to the reading, and writing, and teaching piece of it. I often wonder, actually, about what you said, which is the idea of even young people who have access to YouTube, or have phones, but certainly older people, too, we've become very reactive. Instead of saying, "Here's a book, and I'm going to go actually find that information," we're mostly waiting for information. Right? A tweet comes, and do we like it, or do we not? There's a Facebook post. What do we think of it? So, there's a lot of waiting for people to throw things at us every few seconds, instead of deep thinking. So, it's interesting to me... I wonder if you think people have a competitive advantage, who are actually able to stop and say, "No. I'm going to spend an hour reading this smart person's book."

Dheeraj Pandey:

I speak about this to our children, just as much, especially our 12-year-old son, about how he's just consuming, consuming, consuming. All he does-

Kara Miller:

Yeah.

Dheeraj Pandey:

... is consume. I'm like, "So, if you are consuming, somebody's producing and creating."

Kara Miller:

Right, right.

Dheeraj Pandey:

"Why don't you become that creator?"

Kara Miller:

Right.

Dheeraj Pandey:

I think those who create... I mean, we give them fancy names like influencers, or whatever, but there's something to be said about people who create and produce. We definitely need to get our children to start to think about that because consuming has become so easy and so inexpensive, and so addictive. You know?

Kara Miller:

Yes.

Dheeraj Pandey:

Think about scrolling on a TikTok-

Kara Miller:

Right.

Dheeraj Pandey:

... sort of app for hours on end. Yeah. We need to get out of this dopamine world into a more oxytocin and endorphin world, as well, I know.

Kara Miller:

A final question for you, which is... I guess, this is a two part. How are you a different person than when you had a start-up last time, and how scary is it to start a company again?

Dheeraj Pandey:

Mm-hmm, mm-hmm. When I was starting Nutanix, we didn't have any children. I asked my cousin, "Should I postpone having a family because I'm starting something from scratch?" This is 2009. I think the best advice he gave me was that, "If you are a good father, you'll be a good entrepreneur." That stuck with me. You know?

Kara Miller:

Hm.

Dheeraj Pandey:

Ever since, we've had three children, and I've been more patient. I breathe more in front of them because I need to be invoking all the patience I need. I feel like I know more, now, than I did back then. So, in many ways I'm more knowledgeable, which makes me a little bit more paranoid, now, than I was my first time. First time, we just kept raising money once a year. We didn't have that forethought of, "What about the runway for two, three years?" We just kept building, and building, and building. It was just looking forward. This time around, I work backwards from things a lot more than I did the last time. That makes me optimistic. At the same time, it makes more paranoid because I know more than the last time. That's a timeless journey for any entrepreneur so I'm enjoying it to the hilt. I'm learning to do even more work on design, and consumers, and delight, than in my last company. But, I couldn't have asked more.

Kara Miller:

And, you're reading, which is important.

Dheeraj Pandey:

Oh, yeah. The reading on biology, as well. I mean, just learning so much. Since COVID, we've learned so much on what-

Kara Miller:

Yeah.

Dheeraj Pandey:

... the environment around us could do to us. So, I'm just beginning to understand things around biology, which is just so profound. Not that I could have done a company because I just don't know enough, but to read on the sidelines, and to invest from the sidelines, has been fulfilling.

Kara Miller:

Dheeraj Pandey is CEO at DevRev. He's also investor and was the co-founder of Nutanix. Dheeraj, thanks so much. This was great.

Dheeraj Pandey:

Thank you so much, Kara.

Kara Miller:

And, thanks, as always, to you for joining us. If you want to hear that Ethan Mollick interview that I referenced, about sleep, and entrepreneurship, and these kind of business myths that often impair our ability to succeed, you can find it at Apple Podcasts, or wherever you get your podcasts. I'm Kara Miller. Our show is produced by Matt Purdy.