Executive Cases: Interviews with Senior Executives of Early-Stage Companies:
Qualtrics – USA
Prepared by George Foster and Sandy Plunkett
Qualtrics is a leading global supplier of enterprise data collection and analysis products for market research, voice of customer, employee performance and academic research. The company was founded in a basement in 2002 with the goal of making sophisticated research simple. Qualtrics Research Suite helps organizations conduct research faster, cheaper and better than ever before.
Qualtrics has been profitable since its inception, a result of bootstrapping and exponential customer growth. In 2012, Qualtrics received a US$ 70 million investment from Accel Partners and Sequoia Capital, the two firms’ largest-ever joint investment. The company reached US$ 48 million in revenue in 2012 and has more than doubled its workforce in the past year to 350 employees.
In 2013, Qualtrics was named to Forbes’ list of “America’s Most Promising Companies” and Qualtrics Chief Executive Officer Ryan Smith was named one of “America’s Most Promising CEOs Under 35”. Qualtrics has more than 5,000 customers, including half of the Fortune 100, over 1,300 colleges and universities, and 95 of the top 100 business schools. Customers include top brands across every major industry, including Amazon, Boeing, Chevron, Citibank, ESPN, FedEx, Foot Locker, Expedia, GEICO, MasterCard, MetLife, Microsoft, Neiman Marcus, PepsiCo, Prudential, Royal Caribbean, Southwest Airlines, Thomson Reuters, Toyota, Travelocity, Vodafone and Zappos.
Q1: What was the source of the initial idea, and how did that idea evolve into a viable, growing company? How did it change over time?
R. Smith: “I was a sophomore in college and working in Los Angeles on a summer programme. My father, Scott Smith, a veteran market research professor, was diagnosed with throat cancer, so I took a semester off school to be with him. He was always tinkering with technology to make the research world better. When he would come home from his radiation treatments, he couldn’t speak. I bonded with him by helping him with his work. By the time he recovered from the cancer, I had signed up 20 clients and we had formed a business around Qualtrics Research Suite.
“Our goal is to make sophisticated research simple. Many organizations today are using tools that are either too basic or too complex – or they are outsourcing research at great expense. We offer a survey-based platform that makes it easy to get real-time insights. The most successful organizations will make decisions based on data. We help organizations be right.”
Q2: What were the major growth accelerators for your company in the early years of high growth?
R. Smith: “In the early days, academic clients were the only ones open to doing online research. Most of our growth was by word of mouth. We set a goal to get 100 universities on board, and then 250 – now 1,300 universities are using Qualtrics, including 95 of the top 100 business schools. It actually turned out to be a brilliant strategy as thousands of MBAs are going to corporations and influencing the buying decisions for enterprise survey software. It’s gone viral.
“Our market really changed with the recession in 2008 when companies realized they needed data to be right and to remain competitive. They needed to make sure every move they made really counted. That’s when our corporate business really took off. Businesses realized that Qualtrics was the platform to get that data.”
Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?
R. Smith: “We weren’t looking for capital as we’ve always been a profitable, bootstrapped business, but we wanted partners that shared our vision for growth. Our partnership with Accel Partners and Sequoia Capital has been a best-case scenario for us, particularly as we expand internationally. Both firms are excited about our business and it’s great to have them in the tent with us.
“We are headquartered in Utah, a state that Forbes magazine consistently ranks #1 for business. It’s a great place to be an entrepreneur. Utah also has a strong tech sector and we have access to a highly educated workforce of more than 100,000 university students in our immediate area.”
Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the ecosystem and their resultant challenges.
R. Smith: “Many people told us we wouldn’t be able to hire the right talent, as we aren’t headquartered in Silicon Valley. Mike Moritz, the Chairman of Sequoia Capital, once told me over dinner that he saw the opportunity for us to build a great company in Utah. That was a huge vote of confidence for me.
“We have strict hiring standards and have been able to hire locally, as well as attract talent from out of state. When you build a great company, great people want to be a part of it. We’ve more than doubled our employee count in the past year to keep pace with our rapid growth.”
Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?
J. Smith: “Our international customer growth actually surprised us. For several years, we had a US team coming into the office at 2 AM to work with our European customers or at 3 PM to work with Asia. These teams did a phenomenal job – so much so that we opened our first office in Europe with US$ 10 million in revenue under our belt. We’ve bootstrapped our international growth just as we have bootstrapped the company for the past 10 years.”
R. Smith: “We wanted to expand to a location where we could run a similar model in a new market. We recently opened an initial office in Dublin, which is a great fit. In three weeks we signed a lease, established an office to scale to 50 employees, moved a landing team over and hired a head of the office. We see blue skies ahead.”
Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?
J. Smith: “The number one challenge for us is finding the right talent. Obviously, we want people who can perform, but we are also an incredibly transparent company. It’s our way of doing business and we don’t want to manage any differently in Europe. The worst thing you can do is lower the bar because you think the local conditions don’t match. I learned this over and over when hiring at Google. You don’t lower the bar – you just look harder. All countries have great people. The upside for us in Ireland is that there is a lot of talent.
“Another challenge in expanding to multiple locations is maintaining the same level of high-touch customer interaction. At Qualtrics, we offer a Rolls Royce product, with Ritz Carlton service and a Honda price point. Offering superior customer service across all countries and languages is at the core of our brand.”
R. Smith: “Another challenge in growing internationally is the ability to maintain our unique corporate culture. We’ve gone to extraordinary lengths to build out internal systems and design an office in Dublin that makes everyone feel like one big company. For example, we have cameras in the offices so people in the US can see the European team and that team can see what’s going on at the home office. We’ve also been diligent in getting ideas and advice from people who have done it before, like the guy at Google who opened Europe and hired 3,000 people. We want to learn from the experiences of others how we can best execute. We know we’ll make some mistakes, but we don’t want to make the same ones others have made.”
Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?
J. Smith: “The Irish government has been a willing partner for us and provides a welcoming environment for tech companies. That is not the case in many countries. We are finding great local talent, and we were able to get work permits easily for our landing team. Our main impediment is the rate at which we can hire people with the right language skills. And we sorely miss having access to a Staples or an Office Depot.”
Q8: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.
R. Smith: “A high point for me was having all of the company founders in Europe recently and realizing how far we’ve come from our days as a basement start-up, to now becoming an international company. There is huge excitement among the landing team – they are working hard and are already having great success.
“A low moment would definitely be the price tag, as international growth is a big investment with a lot of upfront costs.”
J. Smith: “Negotiating with landlords and working with construction teams can be wearing, particularly when we wanted to create a unique office space that reflects our corporate culture. We also learned that our European team was hesitant to sell into some countries because we lack the right language skills, but we’re hiring for that.
“A high moment for me was completing the office, turning on the IT systems and phones, and having the landing team arrive. We even saw a few Qualtrics t-shirts around town. One of the best surprises was being warmly welcomed by the local universities in Ireland because they are all our clients. Qualtrics has a strong presence in the academic market. They all want to help us hire great people. We learned that the youth unemployment rate is 30% in Ireland and we have some of the best jobs out there.”