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- [00:00]
A
And we talk about professional goal setting. Is it true you Write down your 12 month goals and carry them with you?
- [00:06]
B
I'm gonna be a tad bit geeky here. Any point in time. Your brain is basically processing over 2 million pieces of information. And if you don't help your brain prioritize it, it will prioritize it by itself.
- [00:18]
A
What's your framework for personally evaluating if a company is one, you should join?
- [00:23]
B
So I have this I'll say rough and tough framework. I call it the three T's total addressable market, technology and team.
- [00:31]
A
Can you talk about the LE learning and adapting part? How often are you looking to change the plan and implement what you're hearing?
- [00:37]
B
You get a lot of calls as cfo, I need more money. Of course you need more money. Let's think through how are you prioritizing? The strategic goals that you set tend to be true north.
- [00:46]
A
I'm curious how networking has impacted your career trajectory.
- [00:50]
B
You're as good as your networks. If you screw up, you wouldn't have a network. So if you're showing good business results, typically, you know there'll be people who'll have your back.
- [01:01]
A
Is this thing on?
- [01:04]
B
Yesterday's price is not today's price.
- [01:16]
A
Welcome back to another episode of Run the Numbers. I'm cj, a tech cfo and I interview really, really smart people like Rohan Savaram. He's the CFO of Confluent. This guy carries around his goals in his wallet. I love this. He can revisit them at any time. That's the type of discipline I need with goal setting. We go into what it was like to join Confluent at the stage he joined and to scale it to a multibillion dollar company, including the shift to consumption and usage based pricing. And folks, when you make that shift, it's not just a pricing change, it's altering the entire business model. Okay. We also go through the metrics that he looks at on a daily basis to make sure that the company is on track to hit those goals. And also so if you're somebody who's thinking, hey, it may be time for my next chapter here he looks at job opportunities through an investor lens. He looks at the tam, the tech and the team. We also touch on how Confluent has matured its budgeting process over time. And something that he likes to call hybrid zero based budgeting. A lot of you budgeting nerds at home may know what zero based budgeting, but what's hybrid based budgeting? You can probably adopt this into your own cycle. All this and much more coming up next. Rohan, thank you so much for joining me on the podcast.
- [02:29]
B
Cj Great to be here. I was checking my emails. We've been trying to schedule this for almost a year, so I'm glad we're able to do it finally.
- [02:37]
A
I'm very persistent. Hopefully I'm earnestly eager and not annoying. It's a PSA to all the CFOs out there. Eventually I will get you.
- [02:44]
B
When you look at your lineup recently it's been all top tier CFOs, so it's actually a privilege and pleasure to be here.
- [02:51]
A
Thank you, sir. I know you're a busy guy, so, so I appreciate it. I want to start off with a fun one because the majority of the guests I have on this pod are truly type A people. They're very motivated and we talk about professional goal setting. Is it true you Write down your 12 month goals and carry them with you?
- [03:07]
B
I started this practice, say about 15 years back, and I've consistently done it because, you know, I've seen the results come through. I'll tell you a fun story. I was actually on a walk with a mentor of mine and this was about 15 years back and we were just having a chat. During the conversation, he just happened to say he writes his goals down and carries it all the time. And that intrigued me. So I kind of delved a little deeper, A little deeper, a little deeper, trying to unpack why he does it. It turns out that obviously it's a good practice to do it. There are scientific reasons why you would do it. And you know, I'm going to be a tad bit geeky here any point in time. Your brain is basically processing over 2 million pieces of information. And if you don't help your brain prioritize it, it will prioritize it by itself. When you write down your goals and you read it at a regular interval, your brain helps you prioritize your goals in. In a manner that you're not even controlling it. These goals are not just professional, they're personal. I mean, as you think about our lives, you can't differentiate between personal and professional lives. My goals are mostly around, you know, how can I be a better person? And if I can drive more discipline into my life, it ends up being that your professional side of it gets impacted in a positive manner as well.
- [04:23]
A
How often do you look at them?
- [04:24]
B
Few times a month. And there are times where you know you are reflecting and you feel that certain aspects of how you're living Your life is. Could be better. So you reflect on it. You tend to update your goals, so make little tweaks, take another printout, put it in your backpack, and you're ready to roll again.
- [04:42]
A
I'm latching onto that idea of, like, the brain prioritizing, almost solving for whatever you put in front of it. And I was having this moment, I think it was a Friday. I was like, brain dead at the end of the week. And I was just sitting on the couch. It was silent. I was waiting for my wife to get home. And I had this urge to, like, take out my phone and just start scrolling through stuff. And I was like, you know what? I think there's enough stuff in my brain right now just to kind of go through it. I truly do believe, though, if you direct your mind to whatever the biggest opportunity there is, like, it will take that bait and try to solve it subconsciously.
- [05:14]
B
Yeah, 100%. Like, you know, there are different ways to do it. You probably heard people talk about it's a great idea to spend two minutes end of the day to reflect on how your day went. You know, write down things that went well, write down things that did not go well. You're training yourself to focus on things that go well, focus on things that you do well, Try to not do things that you know didn't go well. That's another way of training yourself to get better. So it's. Until I researched, I didn't realize that there is a real scientific reason. Ultimately, for me, it's become a part of life now. So I enjoy the process of doing it.
- [05:47]
A
Can you humor us with a goal that you wrote down and you did manifest it into reality?
- [05:52]
B
You know, our lives are so busy. You're. You're on it 24 7. One thing that was happening, this was a few years back, I was not talking to my parents enough. There was a time where two weeks had gone by, I had not called them. I said, all right. I put out a big, hairy, audacious goal, which is I'm going to talk to them every day. I'll admit that I don't talk to them every day, but I've improved on that significantly. They love it. They wait for my call every other evening, whenever I call. So that's fantastic.
- [06:24]
A
I have a footer at the bottom of the emails I send for mostly metrics, and it says, make sure to drink water and call your mom.
- [06:31]
B
That's a good one. Yeah.
- [06:32]
A
Rohan, what's rule of 168? This was in our prep doc and I've been waiting weeks to ask you this question because it's fascinating me.
- [06:40]
B
Do you know how many hours that are in a week?
- [06:43]
A
Is it 168? I don't like to do public math,
- [06:46]
B
but you have 168 hours a week. You need to sleep, you need to come to work, and then with whatever time you have left, you need to spend time with your family. You might be a spiritual person. You need to dedicate some time to that. It ends up being that you have a lot more things you need to do than the number of hours in a week if you're not intentional about it. Weeks go by, months go by. You spend time on stuff. You need to ask yourself, are you spending time on what's important to you? I need to sleep, which I need to do. I need to come to work. And then everything I have rest of the time is prioritizing for family for me. So I've given up on fun things, happy hours, poker nights, you know, still try to do it every now and then, but when I was young, I used to do it a lot more.
- [07:31]
A
You do strike me as a ruthless prioritizer, which is something I admire in people. How does that show up in your calendar?
- [07:37]
B
Obviously, you need to know where you want to spend your time, but when you talk about calendar, you talk about work. It's a little bit about delegation as well. You have a really good team around you. You're really focused on bringing the best people you can to join you on your journey, to be on the bus with you. Right. As a leader, you absolutely need to be comfortable with respect to helping people do their thing. If you're comfortable in your skin doing that, I think it makes your life a lot easier. Part of the prioritization exercise is effective, efficient delegation and how I have my team do stuff, trust them to do it. More importantly, let them make important decisions. And, you know, once in a while you make mistakes. That's fine. Getting into that process and being comfortable to be able to do that is important. That's the only way I think I can kind of, you know, manage my day, focus on things that I want to spend most of my time on. Give me time to actually think, not just be in meetings all day. So that's the balancing act. You're constantly trying to get together.
- [08:40]
A
Do you think you've gotten better at delegation over time?
- [08:42]
B
Very much so. Part of the delegation is when you're growing up. From early career, you're doing everything. You're creating a report, you're creating Basically building a story. As you kind of progress in your career, I think you try to hang on to stuff a lot more. And, you know, I've been guilty of doing it where I need to review everything that's going on versus trusting the process or trusting the people. More importantly, over the years, I've gotten off significantly better. A lot better delegation, trusting people, and more importantly, making sure that I am spending time. The most important things where I should be spending my time.
- [09:23]
A
There is delegation, and then there's the art, I think, of saying no gracefully. You've improved with delegation and prioritization. You're pretty good at saying no to things.
- [09:31]
B
Now, culturally, you know, how I grew up, you. You never say no.
- [09:36]
A
I always find it fascinating with people's backgrounds of what was a cultural norm and how it intersects with business in India.
- [09:43]
B
When I. Where we grew up, you don't directly say no. You're trying to say, all right, let me try to help you up in some way. That's how my parents are, you know, and that's how. That's the household that I grew up in. Over the years, as I've kind of gone through my professional journey, I feel that, you know, there is no way to sugarcoat it, no way to tell a story around it. Just be super direct that, you know, I don't think it's a good idea or this is not where I want to spend my time. And the more direct you are, I think you get a lot more respect from your peers and team members over the years. Now I'm super direct. Like, you know, I don't think I should be spending time on this. Or we, as a company shouldn't be spending time on this. And let's move on to the next thing. You share your point of view. Sometimes people agree, sometimes people disagree. But that's fine as long as you're being super direct and you're consistent with your thought process.
- [10:34]
A
The consistency, I think, is key and then showing reasons why. And as a cfo, I find the best ones can lean on the numbers and then the narrative and also the shared priorities that you already spoke about of what we all agreed to, because if you have those, it takes kind of the personal sting out of it.
- [10:51]
B
As a cfo, we. We tend to kind of let the numbers do the talking. Let the numbers be basically the building blocks of the story we are trying to tell. Kind of. We are pivoting a little bit. But as you're kind of scaling, building organizations, understanding your numbers, understanding your analytics, the how the business is running is critical. Making sure you have the right building blocks, right setup within the organization to do that. And if you're able to do that, typically the decision making process, your ability to say no becomes a lot easier. So yes, you hit on the right point. It all depends on the numbers and how you are really using that as a framework for decision making.
- [11:33]
A
Hey, thanks for listening. We'll be right back after a word from our sponsors. Maybe the first thought you had when you started a tech company wasn't about scenario modeling or Runway management or the fine print of an S1.
- [11:45]
B
I love a good S1.
- [11:46]
A
That's not where the magic happens. It's more fun to build something new, Design your quarter, zip or network with VCs. But what if you got your financials right early, long before your investors started asking for it? There's no limit to how far you can go and how many headaches you could stave off. Now that's where EY comes in. EY has been a part of Silicon Valley since, well, it was just a valley. And it's helped some of the most successful names in tech go from startup to exit to mega cap. You build the next big thing. And with the teams across strategy, tax, audit and transactions, EY will help you build your next big thing right? Learn more@ey.com TechStartups that's ey.com TechStartups Let me ask you something. If your board wants financials, would you be certain you're not wasting money on SaaS or if a major renewal hits, would you know if you're paying a fair price? Your vendors would. They see thousands of deals every year, but most finance and procurement teams see one deal at a time. That's a tough way to negotiate. Spendheim fixes that intelligence gap. It's one place to track all your software spend and gives you pricing benchmarks across more than 10,000 SaaS and AI vendors. And it's based on real spend data from over a thousand companies. Spendhound connects to your financial systems and shows every software dollar you're spending. Contracts, renewal dates, overlapping tools, nothing quietly auto renews. And you don't pay twice for duplicate tools. SpendHound is the number one rated SaaS spend management platform on G2. It's trusted by teams at ZoomInfo, Hoochie Suite and Kit. Free forever. Wow for SMB and only 10,000 per year for Enterprise with 150,000 savings guaranteed. If you want to stop negotiating blind, go to spendhound.com cj that's spendhound.com cj trusted by over 1000 finance ops and procurement teams, the CFO role has evolved faster than the tools built to support it. Most finance teams are still running infrastructure designed for job that no longer exists. The reporting, the reconciling, the close that bleeds into the next month or quarter. That's not finance. That's overhead with a really crappy title. And the cost isn't just your time, it's everything your best people aren't doing while they're buried in it. Agentic finance shouldn't multiply your output. It should eliminate the work that was never worth doing in the first place. And that's why I run Mostly media on Brex 9th intelligent finance platform with AI powered agents that capture expenses, automatically, enforce policy before the spend happens, and close your books in minutes instead of weeks. 35,000 companies like OpenAI, Coinbase, Anthropic and Doordash already run on Brex. It's time to get Brex AF. Learn more at brex.com metrics Rohan, you've had quite the run at Confluent. I want you to take us back to what the company was like when you first joined.
- [14:36]
B
I've been doing tech operating roles for its close, closing in on two decades now. I never thought I would do it. I stumbled into tech operating roles because of the financial crisis, pre financial crisis. I was with Morgan Stanley in their asset management team and you know, that was my goal coming out of business school that I would do. The first stop was at Symantec where I thought I'm probably going to do it for a couple of years and then get back to investing or something in financial services and Wall Street. You know, when I joined Symantec it was super chaotic. We were going through a business transformation. We had multiple CEOs. There were different CFOs during my time. What was fun was, you know, I was working on a bunch of very impactful projects and in my five years there I think I did four or five different roles. So every year I was doing something new. When I reminisce on that experience, it was all around learning how operating roles are done. My next six years was at Palo Alto Networks. That was a fun journey because it was all about building, scaling, high growth, high growth at scale. So when I was leaving Palo Alto Networks, selfishly I was thinking, I want to find a way to replicate this one more time. So when I joined Confluent we were roughly 200 odd million in ARR 1215 months before an IPO so that was just the broad setup. But Confluent as a company was founded a few years before that. Our CEO and co founder Jay was at LinkedIn when he started the company. And there was this open source ecosystem that hit virality and that was the building blocks of starting the company. We had over 150,000 organizations using our technology. People knew about us. We had a phenomenal slate of venture investors. The board was really, really strong and we had a phenomenal exec team. My focus was primarily to get the company ready for the ipo.
- [16:35]
A
I'd been watching from the sidelines, just a fan of business. I was working at a hypergrowth tech company in the security space actually. And your growth was truly astounding. It happened, it seemed like in a short period of time. I'm curious. So like what was the state of the budgeting process, the planning process? What did you walk into after being at relatively more mature companies at Symantec and Palo Alto?
- [16:57]
B
The state of the budgeting process? It was, I would say, where it should have been. Really good people, well managed company. So my goal was like, you know, take it from point A to point B. When you're getting a company ready for an ipo. Before I come to the budgeting process, there are probably two or three things that are absolutely needed. Number one is do you have accurate numbers that you're reporting your code to cash process, your procure, to pay process, your billing systems, your IT systems, Hardening, all of these before you're a public company. So that was focus number one. I'm not joking. We probably kicked off 20 different projects, mini projects, to make sure we are tightening all of these areas of the business. The second area was budgeting. Super strategic, super important because you know, if you get it wrong, you know it's a huge productivity suck. Especially for a hybrid scaling company where you deploy your capital really matters. I mean that's the biggest constraint. You know, you invest in R and D, you get returns in 18 to 24 months, sometimes even longer. You invest in sales and marketing. You're basically Getting returns in nine to 12 months. As you're doing this, you're trying to build and invest in GNA to build the right processes, right technology, so that when the company doubles, triples, quadruples, things don't break. That was the mindset for me when, when I joined Confluent around the building a budgeting process, building an operating plan. There are probably four building blocks to building a successful operating plan. It all starts with the company mission. Sometimes you take it for granted, that'll happen. But you start with a company mission. You have the CEO write down his mission statement, his focus, not more than a single page where this is what I really care about and this is what I want to accomplish in the next three years. And then based on those, you create your set of strategic goals. And typically I ask every functional head, every e staff member to create their one page strategic goals. So even before you put pen to paper, even before you get into spreadsheets, these are probably important aspects of the budgeting process that you need to kind of go through. Then you develop your operating plan. Most companies have, you have a three year plan, you have an annual plan, you have quarterly plans, and then you're executing your quarterly plans with a monthly forecasting cycle. And every month you're actually updating not only the quarter, but rest of the year from a forecast perspective. That's the continuous nature of a planning process that you're trying to build. That's probably developing the operating plan. And then the fourth thing is as you're executing, you're learning and you're adapting. So these are the four pillars like company mission, the strategic goals, developing the plan and then execute, learn and adapt.
- [19:55]
A
That is amazing. Sometimes you just got to give the guy the ball and let him cook. Can you talk about the learning and adapting part? How often are you looking to change the plan and implement what you're, what you're hearing?
- [20:06]
B
You know, in all the years that I've run planning, the way I think about it is, you know, you have a lrp, which you call the long range plan, right? It's typically three years, five years depending on the company. Three years is more the norm these days. And then you have an annual plan and you set the annual plan. And then you have this monthly forecasting cycle based on, as the actual results come in, you're learning about it, how the plan is working, and then you try to make tweaks. So in a more official capacity, in every company that I've been try to do a very lightweight mid year planning cycle where I kind of throw the ball back at each of the execs and say, you know, you've kind of allocated resources to these areas. If you had to redo it, would you kind of change anything? More often than not, you'll see that, you know, people make tweaks, people make tweaks for their individual functions. But more often than not, it is, it kind of connects to all functions. If your marketing leader says that, you know, I'm not getting great ROI from say, the Japan market. Your go to market team needs to adapt as well. All right. You know, I was thinking of two additional hires in Japan for the second half of the year. Maybe I slow down on it. It's all connected. So it's a good forum to have a lightweight check in the middle of the year. Just move the pieces a little bit. To answer your question, this is a continuous process. You're updating your plan and forecast every month as the results come in.
- [21:33]
A
Two things there, one that you throw it back at people so they have skin in the game and they feel like it's their idea of why they want to change things. You're not coming top down and saying, hey listen, this is what we got to do. You're putting the ball in their court. And then the second thing is you're pointing out that it's all interconnected. You can't be making these decisions in a silo.
- [21:49]
B
Another thing about writing down the strategic goals is, you know, I personally like a lot of healthy tension in the pending cycle. I call it healthy tension because you get a lot of calls as cfo. I need more money. Of course you need more money. Let's think through. How are you prioritizing? The strategic goals that you set tend to be true north if you have a list of things that you want to kind of invest in and if it's not aligned with your strategic goals, it's easy to put it below the line occasion. For the short term, it acts as a default prioritization system for basically executives. We also do a little bit of, you know what I call hybrid zero based budgeting.
- [22:27]
A
Hey, thanks for listening. We'll be right back after a word from our sponsors. I've seen a lot of FP&A tools and a laugh is one of the few that gave me that aha moment within minutes. I remember watching their founder shout out to Albert, connect my netsuite data and build me a full P and L live in minutes. Aleph is now trusted by hundreds of leading companies. I've had the CFOs from Turo 8, sleep, Zapier and more on the pod and every one of them is a huge advocate. I also just published my second annual CFO Tech Stack Report and Aleph has been on the podium both years including a number one finish in the 50 to $100 million segment. This year, instead of being just another planning tool, they built a real enterprise grade data foundation for finance implemented at startup speed with AI native workflows, woven into its DNA. All your systems erp, CRM, hrs, ats, product usage and more. Powering one clean governed data layer that finance can actually trust. With AI moving as fast as it is, they're pushing even further. Mcp, custom AI chatbots, AI powered variance analysis and the list keeps growing. Try it with your own data at get a left.com run that is G E T A L E P H.com run tell them CJ sent you. Here's a growth tax that nobody talks about Every new pricing model you ship creates a nightmare for your finance team. Usage based pricing. Now you're tracking usage against commitments product bundles. Now you're untangling what to recognize and when for every line item. Mid cycle upgrades. Good luck. Manually reallocating revenue. The pricing strategies that drive growth are the same ones that break your finance process, right? Rev turns that irony into a competitive advantage. Your product team can ship new pricing without asking finance for permission and your sales team can close deals without worrying about downstream chaos. But I've seen too many companies where sales are celebrating a huge quarter while finance is still trying to figure out how to recognize half of it. It's actually me. So here's a good place to start. Write Rev built a free tool@calculator.wrightrev.com it scores your RevRec process, shows what's exposing you to risk and tells you exactly where to focus before it bites you in the rear. Probably explains why your last close took so long. Check it out at calculator.wrightrev.com, alright without the Boston accent. Calculator.wrightrev.com I got news for you. The ERP category is finally getting disrupted and if you haven't heard of Rillet yet, please pay attention. It's the AI native ERP built specifically to replace netsuite and it's already won over hundreds of finance teams. Their mission is to make these zero day close a reality. And they're actually doing it. We're talking teams closing the books at 1:35pm on the first day of the month. Companies like Windsurf, Mercore and hundreds of others run their entire finance stack on Realist, revenue recognition, Close management, Multi entity, native stripe and Salesforce integrations. Woo. Everything a scaling company needs. They've got 5.0 start 5.0 wow 50 stars on G2. They're backed by A16Z and Sequoia. Heard of them And CPA LED implementations that get you live in 45 days. That is simply unheard of in the ERP space. If your books aren't running as fast as your business, check out row it. Book a demo at rillet.com cj that is R I L L E T.com cj that's me. Please break that down because I've heard of zero based budgeting. I'm curious what hybrid zero based budgeting is.
- [25:52]
B
You know for this I need to tell you another story. This was during my days at Symantec. You know, we were going through business transformation. We had our friends from Bain come over and do what we call this zero based budgeting cycle. If I were explaining zero based budgeting to layman non finance person, I basically say you start with a clean sheet of paper. Start from ground up. Here are the activities I need to do and here are the resources I'm going to align to it. And here are the systems I'm going to get and here are the processes I need. Simple people process technology. What goals we need to accomplish. We did that process at Symantec. It was a six month process, super detailed. And I learned a lot coming out of that. As I was reflecting, I thought this absolutely needs to be part of my playbook for everything I do. But then I realized quickly that you can't get into doing a zero based budgeting planning cycle every year as a company. Too detailed takes too much time and you're involving almost half the company. Basically said, all right, we're going to do this thing called the hybrid zero based budgeting. This might resonate with you when we go through budgeting cycles. And by the way, I'll raise my hand. I do it a lot as well. Say you spent $100 this year and you're thinking about the budget for next year. Your initial thought process is I'm spending a hundred dollars this year. I'm growing the business X percent, I need Y dollars next year. So your thinking is what I call incremental thinking. The hybrid zero based budgeting philosophy basically takes you away from incremental thinking and kind of asks you step one of the process is you have $100 this year. Why don't you figure out what you're going to stop doing? And that's a very important part of our planning cycle where okay, these are the few things I'm going to stop doing. You free up some dollars because you're going to move away dollars from that activity. Then you think about how much incremental dollars you're going to invest. So that's the process we go through. It still follows the four pillars, but as part of building the operating plan, you're really thinking about what are you going to stop doing? That was part of our DNA at my prior company. This company will generally go through that cycle and obviously a lot more work. But as you're kind of approaching it, it's important to get alignment with the executive team. In every company I've done this, the executive team has been aligned and actually excited to do it because it gives them better visibility into their areas of spending and how they are allocating their resources.
- [28:26]
A
It's a simple but powerful reframe. To start with, what are we not going to do? And then to use that budget to fund the other stuff. How are leaders at leaning into that, Giving up stuff that they were doing before or saying, you know what, I don't need that anymore.
- [28:41]
B
For a lot of folks who've not done it that way, it's a little bit of a change, but that's fine as long as you can articulate why you're doing it. I think it makes a huge difference. And as part of our process, every year we had this call. We used to get our top leaders in a room, and that was my opportunity to articulate, like, why we are doing it. The message. Every year used to be the same message. Repetition does not spoil the prayer. As I say, that is the same message and helping them answer the why. So once you get that, you're willing to dig in, you're willing to spend more time ultimately with the objective that the output is positive.
- [29:21]
A
Rohan, if there's somebody listening to the podcast and they said, I want to give this a try, but I feel like the leaders are going to ask for some sort of guidance. Is there a percentage that you encourage people to peel back before they ask for incremental spend? Do you go to them and say, hey, we're looking for 20% off here before we start moving forward.
- [29:40]
B
No hard numbers. What we've also learned is if you don't have hard numbers, typically the output is all the $100 I was spending is super strategic and critical to your point. You know, you draw a line somewhere and depending on your organizational comfort level, you know, draw the line at 15%, 10%, 20%. You need to start somewhere. Even if you go from 0 to 10, that's a huge win. Trust me, it's a huge win because you know, you're reallocating and the message is clear. I'm not going to take the money away from you. I just want you to rethink how you're allocating Your dollars are you allocating your dollars to the highest ROI areas of your respective businesses? So once you give them confidence that you're not taking the money away, but as an exec team, when you have your annual planning reviews, we will all be making sure that we go through your list and understand what you're stopped doing. That's always a good start. Start anywhere, start at 5%, 10%. It's better than zero.
- [30:37]
A
I want to transition to talk about pricing, something that I know we're both passionate about. And during your time at Confluent you moved from subscription to consumption based pricing. So my first question is what signs told you that this was the right
- [30:49]
B
move for us At Confluent it was kind of a no brainer. We had I would say three business models, three ways we were selling right our plg side of the business. Developers, technologists would actually come to our website. Very powerful because of the large open source community. The second piece was our on prem product. Think traditional software sale. You're selling bookings, tcv, acv. Then you have your revenue recognition rules and you use the revenue recognition rules to basically forecast revenue. It was a truly cloud native product and it was different from traditional software. We are software execs. They were how we grew up. We never thought about gross margins because the incremental cost of shipping a unit of software was zero. But in a cloud business, incremental unit of consumption had real costs associated with it. That's why I say it was a no brainer if you have to build a responsible business for the long term. Very early in our journey with Confluent Cloud, which was our cloud business, we knew that this was going to be a big part of our business. If we don't have consumption usage based pricing, I don't think we'll be able to have control over unit economics of the business. Fast forward five years. Today every AI native business has some form of of usage based or consumption based pricing. It is needed. Otherwise you know you're probably going to lose money. You know you won't have control over how the unit economics eventually shape up for the business.
- [32:20]
A
Back then though, did you view this as a one way or a two way door decision?
- [32:23]
B
It is a one way door. I don't think it was reversible. You know it right on the pricing side for consumption based pricing, it is not just the pricing.
- [32:31]
A
No, it's your whole org, your whole
- [32:32]
B
org, how you're architecting the org. You have a multi year plan of how you want to get There. But in addition to our CEO who was leaning in the trifecta was president of field operations or CRO. Your chief product officer was really thinking about product pricing and the CFO and just being joint at the hip. As you're making these calls, thinking through how to build that business was critical.
- [32:59]
A
Why can this be such a disorienting change for management teams?
- [33:02]
B
As we are kind of going through our decision making process, we tend to look at what I call as pattern recognition. You look at your past lives and you tend to figure out all right, what has gone well, what are the decisions I've taken that have worked and what are the decisions I've taken that have not worked. When we went through this transition, none of us had any pattern recognition. It was new. Five years back when we embarked on this journey, there were probably two public companies doing it at scale. Outside of the hyperscalers, it was Snowflake and MongoDB. Databricks was doing it, but they were private. There are a few other companies who had started the journey but were much earlier in their life cycle. Not a whole lot of pattern recognition, not a whole lot of success stories. We were not competitors, so we would tend to exchange notes and learn from each other a little bit. It was a change and it was a new change for management teams, but it was fun.
- [33:57]
A
Did you have to add any metrics
- [33:58]
B
to your purview in a traditional SaaS business? What I like to say, the value creating event is discrete. At the point of sale, you know what your TCD is, you know what your cash flow is going to become. You even know over the next one to three years how much revenue you're going to get every month. That's the beauty of our rev rec rules. Our sales reps get paid. We recognize revenue as a company, so that's a discrete event. In a consumption business, your success as a company depends on your team continuously engaged with the customer, your customer using your product every day and being successful at it. So it's a continuous value creating event focusing on how you run the business from a weekly, bi weekly, monthly cadence where you're looking at bookings, forecasts, doing your revenue forecast, to a daily cadence.
- [34:46]
A
In many ways, the booking is just the start of the lifecycle.
- [34:50]
B
The booking is just the start of the life cycle. The bookings doesn't mean anything. In a traditional SaaS business, once you have bookings, you know what your rev rat looks like. In a consumption business, once you have bookings, fantastic. You have a customer commitment, but you need to forecast for every customer, their individual consumption curves, the cadence of running the business became a lot more dynamic and real time. So, you know, with my morning coffee, it's always about looking at what yesterday's consumption was, tracking it, looking at outliers. And that's not just me. The broader business leaders looking at that long term objectives don't change. They all remain the same.
- [35:27]
A
I want to transition to talking about how you evaluate job opportunities because I look at your resume and I'm like, wow, this guy just picks winners. Many of the people who are listening are probably evaluating what their next step in their career is. This is the hardest time it's ever been to separate what I call the sizzle from the steak. What's your framework for personally evaluating? If a company is one, you should join.
- [35:48]
B
So I have this, I'll say rough and tough framework. I call it the three T's total addressable market, technology and team. How big is the TAM from a numeric perspective? Which candidly, I don't care much because you know, there are a lot of generational companies started with probably minimal tam. And there's a story around Uberstam when they started was less than a billion dollars for tam. What I generally look at is are you solving a real problem? Is the problem going to be relevant for the next five years? If the answer is yes, cj, you and I can debate what that number is. But we will agree that it's a big enough tam. The second one is technology. Having a problem matters or it's important or it's helpful. How you solve the problem is even more important. And doing it with differentiated technology, differentiated and disruptive technology is critical. You always hear about product market fit. That's kind of a de facto test for product market fit. That's your technology. The third piece is the team. You know, as I've progressed in my career, I think it's been increasingly important that I really want to do it with people I want to do it with. I can't stress the importance of it. I've been thus far incredibly lucky with, you know, the places I've been. Yes, TAM and technology, you can find a lot of places. But you know, more importantly, the biggest win in my last 12 years at Confluent and Palo Alto Networks are, has been the people I've met along the way. That's my rough framework. And you know, typically if you can kind of check the boxes as you go through your process, more often than not, you'll probably be fine. I mean, listen, if you're Joining a early stage company. A lot more companies fail than succeed, so you need to be extremely lucky with the places you pick.
- [37:38]
A
You mentioned how important the people element is. I'm curious how networking has impacted your career trajectory and maybe what's changed in how you've thought about it when maybe you first graduated versus now.
- [37:51]
B
The importance of it is really high. The first bucket is like I said last decade. Plus, I've just met incredible people along the way. There are a few people that I really go to as my personal board of directors, if you may call that or like really mentors. So these are all people who used to be ex bosses, ex executives in those companies we had a working relationship with, ended up being mentors over the years and now friends generally. Typically our jobs are lonely, so you need that close set of folks who you can call to when you want to run something. It doesn't need to be work, it can be anything. The next side, like the valley here, is so small. Building authentic relationships is important. I always feel like when I'm building a relationship, not right now, I'm talking say 10 years back, it's always important to make sure that you reciprocate. Reciprocity is a hugely important. Like, you know, I, I learned it early again, somebody told me when you're having these conversations, always throw it out there. How can I be helpful? Even if it is talking to someone in your accounting team and helping with their financial systems, or talking to the CFO and telling them, you know, what a good VP finance looks like. I mean, you can help in a lot of different ways, thinking through, go to market where you want to allocate resources. I mean, you can help as a cfo, you can help in different ways. But long story short, I think finding a way to build those authentic connections with the mindset of reciprocity is important. The third piece is especially for early in career folks, you're as good as your networks. If you screw up, you wouldn't have a network. So, you know, work hard, focus on what's important, prioritize and like, you know, if you're typically doing them, you're showing good business results. And if you're showing good business results, typically, you know, there'll be people who'll have your back.
- [39:46]
A
I like how you called that out. If you do good work, you'll have a good network that you have the opportunity to tap into.
- [39:52]
B
Absolutely, absolutely.
- [39:53]
A
Rohan, I'm going to take you into what we call our long ass lightning round. So the first question I ask every successful person is you got to give me one thing. You've messed up on the job before. It could be this role or any other.
- [40:04]
B
This was a long time back. I'll just be clear, not at confluent. Right. My team was responsible for forecasting free cash flow, heavily manual process. So the day quarter ends, get all your metrics in order and try to send a report out to the board. You know, this is our prelim numbers. And one of our analysts in the team comes up to me. I still remember 6pm in the evening. We're kind of, you know, frantically trying to put it together. We were all in in office pre Covid and said, hey, we have a problem. This line in the free cash flow forecast, which is like related to some options exercise or whatever, I don't remember, should have been negative. And in our forecast it was positive. Think about it, if it was like a $10 impact, it gets amplified to a $20 impact because your size changed. Oh yeah, we missed our free cash flow forecast for the quarter. I actually went up to my boss and then we eventually walked to the CEO and I said, hey, you can fire me if you want, but. Sorry. The good news was as a company, we did not guide free cash flow at a quarterly level. It was not a big deal. But it was obviously a big deal for me personally because I had high standards for myself. But more importantly, that kind of inculcated this productive paranoia in me about spreadsheet errors. Every company, every place, every team I've been in, we've had multiple checks wherever a lot of manual spreadsheets are involved. Even till, you know, our last public quarter. I have a way to do my own calculation for the P and L that I generally used to do directly from the accounting system. 10 minute exercise every month. I would do it just to give me peace of mind that what forecast my team's putting together.
- [41:44]
A
What's your favorite check? Everybody has theirs is yours like a retained earnings role or something?
- [41:49]
B
A few checks. A few checks. You know, you can quick check on total revenue directly from the source, right? You can do a quick check on total expenses. Once your operating margin line dies out, you feel good, right?
- [42:03]
A
Next one I got for you. If you could give your younger self advice, knowing what you know today, what would you tell them?
- [42:08]
B
Take more risks. Do stuff that's a lot more outside of your comfort zone. I would have done a lot of things differently, especially very, very early in my career.
- [42:15]
A
Do you think you would have joined smaller companies? What would you have done differently?
- [42:19]
B
I would have joined smaller companies. All the companies I've joined have gotten lucky so it's difficult to even they've all done well. There's certain aspect where you know you could have done few things here and there which are really personal to you from a risk taking ability, risk perspective where you know you could have done early in your career but like no regrets. No regrets.
- [42:38]
A
What tools does your finance team use to get the job done today?
- [42:41]
B
We have netsuite Houdini, we have Navon. Our billing system is Metronome. We have this procure to pay system called zip which is a very cool, cool, cool product. So yeah, so that's, that's our rough and tough accounting. We have plan and then, you know, bunch of cool AI things that we are doing.
- [42:58]
A
That's a great call out there. Have you built anything neat with AI that your team's using?
- [43:03]
B
We have built some cool stuff, some conversational analytics stuff where you can ask about around what's going on in the business and it'll answer the questions pretty accurately. So you're kind of not searching for data points. Our data science team is phenomenal and they've done a good job in kind of building a good data layer, a good context layer and then like, you know, you have some kind of a frontier model or a model on top that kind of helps you with it. So that's a cool thing that our folks in the team generally use quite a bit.
- [43:34]
A
Rohan, this has been an absolute blast. I've been such a big fan of Confluent and I appreciate your willingness to come on and spend time with me today.
- [43:40]
B
Thank you very much for having me. It was a fun conversation and I'm sure we'll stay connected.
- [43:45]
A
Run the Numbers is a mostly media production yelling an intro by Fat Joe. Artwork by Meg d'. Alessandro show is executive produced by Ben Hillman. Nothing said on this podcast is intended to be business or investment advice. It's the sole opinion of me. A guy who feeds his dog way too much ice cream and has a history of net operating losses. Lol. If you like this podcast, hit subscribe and give us five stars. It will take like two seconds and our algorithm overlords love it. Drink water, call your mom and have a great day. Peace.