What VMware’s former CEO says you should prioritize after product-market fit
Raghu Raghuram on hiring from the school of get shit done, why scaling people is like building distributed software, and the one-way door problem of go-to-market.
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Earlier this month, Ben Horowitz shared that Raghu Raghuram, former CEO of VMware (and product manager under Ben at Netscape), is joining a16z as a general partner, managing partner, and Ben’s consigliere.
Today, we’re sharing a deep dive into Raghu’s operating chops and journey to the firm. Above, we share a conversation with Raghu, General Partners David George and Martin Casado—who sold his company, Nicira, to Raghu at VMware in 2012—and cofounder Ben Horowitz about Raghu’s legendary run at VMware. Below, we share Ben’s reflections on what makes Raghu a great leader, then Raghu’s advice for getting shit done and running a generational company.
Ben Horowitz, on Raghu’s leadership
Nearly 30 years ago, I hired Raghu Raghuram to be a product manager at Netscape. While I do not remember much from those days, I keenly remember how smart he was. He was also eager to learn absolutely everything. The problem for me was that he was so smart that I did not have much to team him about the products or technology, so I narrowed our conversations to leadership. As with everything else, he was eager to learn and quickly became the top product manager in the organization. I had a glimpse, but I honestly had no idea of what a great leader he would become.
I watched from afar as he took over product leadership at VMware. That was quite a feat as the company was founded by my friend Diane Greene, who held her product people to the highest standard in the industry. Naturally, he went on to become the Chief Executive Officer where he grew VMware into a platform company with over $13B in revenue and more than 300K customers in 60+ countries; shepherded industry-disrupting acquisitions such as Nicira, and deftly and uniquely steered VMware from on-premise to multi-cloud technology. As a result, he became known as the greatest infrastructure strategist in the game. Ultimately, he led the company through challenging times to the largest software exit ever in the sale to Broadcom.
He is an amazing strategist and leader, and I am proud of my small association with him.
That is why I am thrilled to announce that Raghu has joined Andreessen Horowitz to push us forward in 3 important areas with 3 significant roles:
A general partner on our AI infra team where his incredible infrastructure expertise will serve us well.
A general partner on our Growth team where his comprehensive understanding of how to go to market, scale organizations, globalize, and navigate industry changes will be a huge boost for our growth organizations.
A managing partner and my consigliere who will help me run the firm – I could not be more excited to have a partner whose management and leadership skills exceed my own in many areas.
This is a dream come true for me and a giant step forward for Andreessen Horowitz.
Raghu Raghuram, on what to prioritize after finding product-market fit
Double down on your culture
Your culture is simply this: how do your employees work and collaborate when no one tells them how to work and collaborate? In the early stages of a company, the founder sets the example that the rest of the team can emulate, but that example gets harder to maintain as you scale.
That’s because once you’ve found product-market fit, the rush is on to staff up your org in order to keep growing. You’ll hire managers and employees from different companies: maybe a couple from Databricks, a handful from Google, a few from a startup—you get the drill. Each hire arrives with their own ideas about how to work with customers, each other, and management. If you don’t give these hires a framework for understanding how your company does business, your culture will start to look like the United Nations of Silicon Valley—making it easy to slip into tribalism that can undermine your foundation and threaten your execution.
So the first thing to do before scaling is to double down on your culture. Codify it. Make it a critical component of hiring, promoting, and firing. Invest in every aspect of your business practices that makes you who you are.
The capabilities and qualities you look for in hires will obviously depend on the kind of business you run. At VMware, we sold a highly technical product. True to our academic roots, we were highly collaborative and prioritized getting to the right answer instead of just being right. We took a “solve the damn problem” approach to every customer issue. Our culture was such that if the customer was in trouble, you were in trouble. Firefighting was the norm. So I looked for leaders who cared deeply about problem solving and could “ride the elevator,” or both work comfortably close to the technical details and communicate the 30,000-foot view. That’s also why I wasn’t always looking for people from Stanford’s GSB. I wanted to find people from the school of GSD: get shit done.
Further reading
Lock in your operating framework
Just like scaling software systems requires building the right architecture, scaling with humans requires building the right operating framework. You need to figure out the core operating primitives for your company—like the units of work, the methods for decision-making, the interfaces for communicating, delegating, and holding people accountable—to keep scaling quickly. If you don’t design and update these primitives for the next stage of scale, you’ll likely see your business performance suffer because people don’t share the right context, have different assumptions about the business, or start pointing fingers at each other. The operating framework for scaling from 50 to 200 people will be different when scaling from 200 to 1000 people, so you have to establish and assess the operating framework at each logical scaling milestone.
Further reading
Systematize your go-to-market
Plenty of people think the term “go-to-market” just refers to direct sales, but it actually refers to your entire strategy and operating framework for getting your product into the hands of as many buyers as possible, as quickly and efficiently as possible. The decisions you make about your GTM are what Jeff Bezos would describe as “door 1” decisions—hard to reverse once you make them—so designing your GTM to help you move fast and gain leverage sets the stage for you to scale.
Think of your GTM framework as a set of interconnected and interlocking parts. Creating or owning a category accelerates demand for your product, partnerships can decrease the marginal cost of accessing and acquiring customers, and pricing can either enable or hinder your distribution. When you orchestrate these parts well, you’ll continually lower the cost of each incremental sale, which helps you reach escape velocity.
Every company’s sales motion is different, but the important thing is to make it cookie-cutter-level repeatable, then figure out where you can get more leverage or layer on a new motion. Until we reached $4B in revenue at VMware, our ASP was less than $20K, but we could acquire over 300,000 customers in 67 countries at a relatively low cost of revenue because we had dialed in our GTM system. We created a category that accelerated customer demand and pulled in demand for our ecosystem of partners. Our pricing strategy dovetailed with our partners’ business models, which allowed those partners to scale our distribution by orders of magnitude. My sales counterpart—who’s now the CEO of Workday, by the way—hired sales leaders who could execute this model and optimized for simplicity above all.
Further reading
Anatomy of a platform company (especially useful for operating and financial benchmarks of best-in-class platform companies)
Final words?
Scaling a company is the best race you’ll ever run in your life. Congratulations: it’s just starting.
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This really resonates with how Uber has evolved over the past few years. The part about systematizing go to market is spot on when you look at how they expaned from premium rides to basically becoming a multi sided platform with Uber Eats and Uber Freight. The cultural shift from the Travis era to Dara's leadershi was pretty much textbook on what Raghu talks about here with codifying culture. I think the most intersting parallel is the operating framework stuff, like when you're scaling across 70+ countries you really do need those primitives in place or everything falls apart. The pricing algoritm and driver matching systems they built are exactly what he means by building the right architecture for scale. It's wild how similar the challenges are whether you're scaling enterprise software or a ride sharing platform.