By Haley Kim with Laura Mandaro
In April 2014, Outreach CEO Manny Medina was close to running out of cash—again. Months before, his teetering human resources startup had reinvented itself, chiseling out the internal tech it used to prospect for sales into a stand-alone app that it was trying to sell to other businesses. Early customers liked it, but the Seattle company was burning through its remaining $150,000, and the first version of the software kept glitching. They would need to rebuild from scratch. “We were back to square one,” Medina recalls.
While his cofounders toiled on the tech, the former Amazon and Microsoft manager sublet office space in San Francisco from another company to hunt for deals. Medina would spend the day on foot, meeting an investor in the Salesforce plaza, then pitching the software at a Peet’s Coffee on Market Street. “It’s very hard to say no when I’m right there,” Medina, 46, says.
“I don’t come from central casting. I know what it’s like to be marginalized.”
The shoe leather paid off. Medina, who has close to a 5% stake in the company as do his three cofounders, drummed up dozens of angel investments, then raised bigger rounds starting in 2015 from VC shops like Mayfield, Trinity Ventures and DFJ Growth, for a total $238 million at a most recent valuation of $1.1 billion. More than 4,000 customers, including Adobe, Microsoft and DocuSign, have signed up. Outreach’s cloud-based subscription software makes digital cold-calling easier, letting sales reps plan the best times to reach out and track which type of communication works best, whether texts, emails or LinkedIn messages. Outreach generated $38 million in revenue for the 12 months ending January 31, 2019; Forbes estimates it nearly doubled sales to $70 million for its latest fiscal year.
Medina and the board are already talking about going public—maybe through a direct listing like Slack or Spotify—though not for at least a couple years. “Our goal is to take Outreach and become a large, independent company,” says DFJ Growth partner Sam Fort.
According to Gartner, companies worldwide are expected to spend $15 billion on technology designed for salespeople this year. Salesforce, with $13 billion in annual revenue, dominates, thanks to a pioneering customer management system. It’s only dipped its toe into the niche occupied by Outreach and its direct rivals, Atlanta-based SalesLoft and Xant (formerly InsideSales) of Provo, Utah. In the last two years, Marc Benioff’s company bought other cloud companies, such as Tableau for more than $15 billion and Mulesoft for $6.5 billion, suggesting it could move on Outreach or a rival if the time were right. “It’s clear that Salesforce isn’t afraid to make big, bold, expensive moves,” says Forrester analyst Mary Shea.
Salesforce, which dominates cloud-based sales software, is more partner than rival. For now.
But Outreach’s success has had its human costs. Eight former employees who worked at the company between 2017 and 2019 describe a hypercompetitive workplace that led to constant turnover, cutthroat even by software-startup standards. Another complaint: it wasn’t friendly to women employees, according to six former staffers, who cite sexually charged jokes and a tendency for male-dominated happy hours.
Medina acknowledges Outreach had problems with employee retention, pointing to the summer of 2018 as its worst, which he blames in part on trying to scale and hire reps too quickly. Himself an immigrant—his LinkedIn bio lists his port of entry as Newark, New Jersey, a nod of support for other would-be immigrants—he’s particularly sensitive to charges Outreach wasn’t welcoming to women. “I don’t come from central casting. I’m not an old white guy from Silicon Valley,” he says. “I know what it’s like to be marginalized, so I take this to heart.”
As a child in 1980s Ecuador, Medina grew up far removed from the world of software startups. His Ecuadorian father, a civil engineer, went to high school in Cuba after his Communist grandfather fled there after a military coup. In Moscow as a college student, Medina’s father met his Russian mother, then the two returned to the Ecuadorian port city of Guayaquil, where his mother taught at the university. His parents divorced when he was 5, and in 1978 his mother moved to the capital city of Quito. During summer vacations, Medina was sent to his step-aunt’s shrimp farm to help with the nighttime harvesting.
Medina had expected to study abroad for his education, probably in East Germany or the Soviet Union. German, not English, was his second language. But the Berlin Wall fell and the Soviet Union collapsed in his last years of high school, erasing his prospects of getting a scholarship to the U.S.S.R. or East Germany. “The whole edifice just disappeared overnight, and now I had to figure out my way in the world,” Medina realized. He enrolled in a university in Ecuador, studying computer science, then moved to the U.S.
In Outreach’s cash-strapped early days, Medina landed in the hospital with a tooth infection; he had quit paying insurance premiums to save costs. As a former Microsoft exec, it was hard adjusting to startup life and “barely making things meet.”
Timothy Archibald for Forbes
He graduated from the Stevens Institute of Technology in New Jersey in 1997, then received a master’s in computer science at the University of Pennsylvania and an M.B.A. from Harvard. He landed in Seattle as a product manager for Amazon, eventually becoming a founding team member of what would become cloud juggernaut Amazon Web Services. He jumped ship for Microsoft in 2005, running business deals—his claim to fame, he says, was figuring out how to beat Apple and Android to the mobile phone market in Latin America.
Microsoft’s foray into mobile phones, however, was like “pushing a rock uphill,” he says. Medina quit in 2011. He hooked up with Andrew Kinzer, a designer he met through other ex-Amazon managers, to join the 2011 Seattle class of accelerator TechStars. There, they met Gordon Hempton and Wes Hather, Outreach’s other two cofounders. After abandoning a few ideas, they finally launched a startup called GroupTalent, which sold a service to match corporate recruiters with job candidates.
Two years later, however, GroupTalent was fizzling. It couldn’t get enough job seekers to sign up. Recruiting managers were used to paying search firms to hire specific candidates but didn’t have budgets to spend on software packages. By December 2013, GroupTalent was down to its last two months of cash. “Human resources is a really hard place to sell,” says Sarah Imbach, the former LinkedIn chief operating officer who now sits on Outreach’s board.
In February 2014, Medina had his breakthrough. He was in downtown San Francisco, preparing to head to the Crunchies, the tech industry’s annual award show. The GroupTalent tool, which scraped public internet profiles to help craft personalized-pitch emails, was generating high open rates. But his small sales team couldn’t close enough deals to keep going. Frustrated, he had gone for a walk around the financial district with one of his board members, Boris Wertz of Version One Ventures. Medina told him, “The current business is not working, but I’m getting a lot of positive feedback around this workflow that we built internally. A lot of people want to buy it.” Wertz’s response: “Sell it.”
“I don’t feel like working in a ‘mosh pit.’ ”
Medina called his Seattle cofounders from his car. They were in a funk. Kinzer had realized the company owed more to lawyers than it had in the bank and staff had started to inventory the computers to sell them on eBay. Medina brought up the plan: They’d relaunch the company around the email tool. GroupTalent board members Wertz and Chris DeVore of Founders’ Co-op agreed to each invest $75,000, giving Medina’s team $150,000 to start anew. Rebranded as Outreach, Medina and cofounders had scored another lease on life, and Medina went into pitch-mode full-time. Over the next two years, he lined up dozens of angel investors (Outreach counts 40 in all), often for as little as $10,000 a stake, until a partner at Mayfield Fund convinced him to go for bigger VC rounds.
“If I gave you back an hour a day, you can do whatever with that hour,” Medina told would-be investors and sales managers, touting the tool’s time-saving ability. “You can go home; you can pick up a hobby.” Or, he added, you could sell more.
As the funding and product took off, the atmosphere inside the Seattle headquarters and remote offices grew intense. Staff swelled into the hundreds, and turnover accelerated. People were complaining about the culture. Working through weekends and vacation was an unspoken rule, four former employees say. It was common to receive messages from managers past 10 p.m., say four sales managers, who, like other ex-staffers, asked to remain nameless because they still work in the close-knit sales community. Within sales, representatives chafed at perceived favoritism—the more experienced reps got better leads, leading to a winner-takes-all atmosphere that discouraged newer reps from sticking around. Women bristled at what some called a bro culture, marked by heavy drinking and “That’s what she said” innuendo-laden jokes. One woman interviewing for a sales development rep position backed out, saying, “I don’t feel like working in a ‘mosh pit,’ ” according to a former employee.
“The way to beat Salesforce is not by creating another Salesforce on a SlimFast diet, or, you know, a cheaper version of it.”
Medina says Outreach has increased retention by centering its sales teams in offices, rather than remotely, so sales reps can learn from each other. He removed bad-apple managers and put its COO—Anna Baird— in charge of the revenue team. Her focus is on hiring and making the workforce as inclusive and welcoming as possible, “so that everyone has a fair shot,” Baird says. Of Medina’s leadership team, more than 40% are female—but the aim is for at least 50%.
“This is not a checkbox for me,” he says. “This is the life I want to live. I want to be surrounded by people who want to feel included, who are doing their best work with peers that they love and respect.”
Medina estimates Outreach has tapped less than 1% of potential customers. His current clients are the ones that try new tech early. At San Francisco-based DocuSign, a $16 billion market cap company that enables electronic signatures, 500 employees use the software to improve the chance a sales rep’s emails, texts or LinkedIn messages will get a response. Sales reps are saving at least ten hours per person per month this way. “You have to land tens of thousands of customers and you can’t do that with a team of 100 people cold calling,” says DocuSign Chief Revenue Officer Loren Alhadeff. “Your best bet is to find a way to make your touches more important, and more pertinent.”
Buying some time for Medina, Salesforce CEO Marc Benioff doesn’t seem that focused on the sales engagement space, which represents less than 2% of the total sales technology market. One possibility, says Gartner analyst Todd Berkowitz, is that the San Francisco behemoth won’t dive in until it’s fully developed its own, similar product. Or it might be waiting for the market to get big enough. For now, Outreach is more partner than rival, offered to Salesforce clients as an integration. (Salesforce declined to comment on Outreach).
“The way to beat Salesforce is not by creating another Salesforce on a SlimFast diet, or, you know, a cheaper version of it,” says Karan Mehandru, a partner at investor Trinity Ventures and an Outreach board member. “It is to create a different product that engages the end user.”
Medina is already thinking beyond the potential pipeline of sales representatives. He doesn’t see why financial advisors or mortgage brokers couldn’t use a tool that makes digital cold-calling more effective. He does jiujitsu four times a week (the “new golf,” he jokes) and is ready to pound the pavement again to spread that message.
“When you can see the bottom and it’s really hard to raise and nobody believes your story, the amount of resiliency you develop, it’s just extraordinary,” he says. “It makes you feel invincible.”
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