Of all the great quotes about entrepreneurship floating around out there, this one from Esther Dyson stands out: “The best investor is your customer.” The fact that Dyson is an angel investor makes her words all the more relevant – and especially so in Waterloo Region’s tech community, where the focus lately has turned to sales. As the number of mature local startups with developed product climbs, customer acquisition has become crucial as they strive for scale – and it requires skills that can be hard to come by in a smaller, engineering-heavy community like ours. That reality had Vidyard CEO Michael Litt beating the bushes recently, in such far-flung locales as San Francisco, New York, Austin and Chicago, in search of a proven leader who could build a crack team to sell the company’s video marketing and analytics platform. After interviewing close to 50 candidates, Litt found the perfect match much closer to home: Kris Lawson, a seasoned veteran who lived in Guelph and worked in Toronto, building Salesforce’s Canadian presence and then working for Microsoft. The father of four young girls, three of them triplets, also happened to have a past connection to Waterloo Region, stemming from his time as a business student at Wilfrid Laurier University. The story of how Litt and Lawson connected, which they shared with me this week, provides a telling illustration of the strength of Waterloo’s compact, close-knit ecosystem. Here’s how the conversation went when we sat down inside Vidyard’s newly expanded brick-and-beam offices in downtown Kitchener. Q – You worked for Salesforce and Microsoft. How did you end up at Vidyard? KL – I’d love to start with my history in Kitchener-Waterloo. I’m a Laurier grad from 2002, and my co-ops were at PixStream, Cisco and RIM. At PixStream, I had a really interesting first co-op term because, on the last day of my co-op term, Cisco bought us for $335 million (US). So, I got to experience that amazing exit, but more importantly, at that stage, I got to experience the power of the Kitchener-Waterloo community. I got to see people like Tim Jackson, Dave Caputo, Marc Morin and all the different players. I got to see Mate Prgin go off and create a bunch of different companies. It was a very formative time for me, because I was able to see the power of this creative class within the community, and how highly networked the community was. I got to see the exit from PixStream, but more importantly, over time, I got to see how the PixStream alumni went off and did all sorts of other things, and it really made me realize the power of this community; that it was a great place to foster relationships. The GTA does not foster great relationships. The challenge in the GTA is, while everyone does meet at King and Bay for a couple hours a week, they live in Oakville, they live in Whitby, they live in Newmarket or somewhere in between. So, if you want to go and have coffee with somebody on a Sunday morning and just talk about your business, the odds of that person being able to do that are very limited. Whereas here, we have an ecosystem where I can go and meet Mike (Litt) for dinner to talk about this business opportunity, and it was a 15-minute drive from my house. Or, if I and another sales leader wanted to talk about networking, we could easily do it on a Saturday morning or something. The odds of me running into people who could significantly help my business at my kids’ events is also huge. It goes beyond the quality of life that K-W provides, and gets to a quality of career that I think is pretty amazing; a career where we can all work together to build up a community versus having to have a moment to converse with others in between long car rides. It feels a lot more like what Silicon Valley feels like, especially in San Francisco, where people are really highly networked in a small pocket, versus people who are moderately networked in a wider area, which is what Toronto is like. Case in point: The relationships I built with Dave Caputo over at PixStream led me to getting Dave to introduce me to Mike. ML – The other side of that is, I was at a Communitech board dinner and talking about how I’d interviewed essentially 50 different individuals in major hubs – New York, San Francisco, Austin, Chicago – for this role, and was at my wits’ end. We had very specific criteria we were looking for. Having built the org to its near-current state, we had a fairly good idea of the type of person we were looking for, and I told that story to Dave Caputo over dinner. And literally, two days later, he connected me with Kris. So, to that point on the network, that relationship existed from when Kris was an intern (at PixStream), and it paid dividends 14 or 15 years in the future. Q – How did Kris escape your notice all that time? He was right under your nose, living in Guelph and working in Toronto. Where was the disconnect? ML – That’s a really good question. We were working with recruiters and had specific criteria set out. The interesting thing about recruiters is, they really only work with people who they’ve placed before, and they find people to place because people reach out to them and say, ‘Hey, I’m looking for a new opportunity; I’d love to look at some of the companies you’re working with.’ It’s a bit of a Catch-22, because sales leaders who are looking for new opportunities and reach out to recruiters are ones who generally don’t have great networks, and ones who are generally not performing that well in their organization. That’s why they’re leaving, because they’re not necessarily making money. And so, Kris had gone from opportunity to opportunity based on his reputation and success, and hadn’t gone through that process of going to a recruiter, because he’s awesome. That’s probably why he missed the boat, because I can’t run a search for every single sales leader in southwestern Ontario, or I’d want to blow my brains out, because it’s tough to develop the criteria that separate them without having any network connection or referral in place. That goes back to that point about the value of the network. If I hadn’t had that interaction with Dave Caputo, maybe we wouldn’t have connected. KL – The relationships are so much more profound here, because you see people so often. The other evening, when we had TCV here, we had 60 or 70 people from the community, from different organizations. (Communitech CEO) Iain (Klugman) was here, Thalmic was here, and Clearpath. That doesn’t happen in Toronto, because Toronto tech companies are in Markham, some of them are downtown, some of them are in Mississauga, some of them are in Oakville, some of them are in Burlington. And they’re so highly distributed that there is no network community that is established. I believe that we’ve established a lot of the network effects of an engineering community, and we’re just at the beginning of establishing similar network effects of a commercial community. The goal that I have for Vidyard is that we build a sales academy here, that builds people who help Vidyard thrive, but then go off and help other companies in Canada – but definitely in K-W – thrive. And (we aim to) build home-grown commercial leaders so that our best commercial leaders don’t go to the United States, and that we don’t have to import great commercial leaders. If we can do that correctly and we can maintain commercial leaders, Canadian companies will be more confident in staying private longer, because they’ll feel like they have the commercial talent to foster that. Q – Did it take much selling on Michael’s part to convince you to come here, or were you ready for a move? KL – I was at the point in my career where I was ready to build something. I was attempting to build things at Microsoft and succeeding, but with pretty extreme effort. This was an opportunity to build without having a lot of the headwinds that a large company provides. I think it was a situation where Mike and I connected and had a great rapport early, but I also knew the deal-breaker-type questions to ask him early on, so it didn’t take as much convincing from Mike in that I knew enough about the community, and I knew enough about the market Vidyard was going after. And as soon as I realized it was a product that was defensible in the market, and that I could sell, and that was unique, then I was on board. ML – I think the message to convey there is, we were very, very close to hiring another candidate who we were sure would be successful, but didn’t necessarily match the exact criteria I was looking for. And so, because of that, and because the introduction came through Dave Caputo, and Kris was looking for the introduction, we were in the fairly nice position of Kris saying, ‘I think I’m perfect for this job and here’s why,’ and us saying, ‘We think you’re perfect for this job and here’s why.’ We actually met at the Boathouse on a Wednesday night, at the bar. It was loud, there was a band playing and it was packed. But again, that’s a testament to the power of this community, because the Boathouse is 500 metres from the Tannery and 500 metres from our office. Back to the tight-knit aspect of this community, all of this stuff happens because everybody is within a kilometre-and-a-half radius of this exact location. KL – It’s so nice when you can develop meaningful business relationships, because meaningful business relationships transcend business and become meaningful personal relationships. K-W is way more than a nice house and it’s more than a shorter commute. It’s just a better community; better interactions that you have with people. As I was going through this process, I found out that an adviser of OMERS, Jim Estill, is my next-door neighbour, and that’s unreal. ML – And he’s an adviser to Vidyard. He was here this morning. The interesting thing is, the network connection to Kris and Vidyard obviously had Jim Estill involved, Sandvine and Dave Caputo in Waterloo, and Communitech, but it also reached all the way to Silicon Valley and San Francisco, specifically to a sales leader there who Kris reported up to, named Tony Rodoni, who I highly respect, and is actually the champion customer of our product inside of Salesforce, which is one of our larger customers. KL – If you subscribe to any of the Richard Florida stuff about creating these creative communities, I think we have everything it takes to do a creative community. The thing is, if we all start to learn how to sell, we’ll all buy each other’s stuff as well. I see that a lot in Silicon Valley. They’re all customers of each other; they’re buying things and consuming things from one another, and when you have more companies that are growing in an area, they buy things from other people. It’ll help perpetuate the community. Q – At the same time, there are challenges to being in a smaller centre. Let’s talk about that. What do you have to be prepared to live with here, that you might not have to live with in a Toronto or a New York or a San Francisco? KL – I lived downtown for 12 years in Toronto. I grew up in London, Ont. and my wife grew up in Fergus, so we have family on this side of Toronto. We had four kids in two years. That kind of drove us to move over, and probably the biggest things I missed in leaving Toronto were restaurants and the Toronto Island airport. That’s probably the biggest frustration I have – the Pearson component to things. It’s kind of a pain, whereas Toronto Island was literally a 10-minute drive from my house. If there are two things we need here, it’s an hour-long trip to Toronto on the train, and it’s a direct flight to San Jose, San Francisco or New York. Those flights would be incredible. ML – I have to believe that a flight from here to San Jose or San Francisco would be full of the same network. That flight on a Monday morning would just have all the right people on it. KL – They used to have a flight from Ottawa to San Jose back in the early 2000s, and they called it the Nerd Bird. I think it would fly out on Mondays and come back on Fridays, or Thursdays. ML – All we need is an airline willing to take the same up-front risks that all of us take in starting our businesses. I’m sure they’d be successful. KL – Another challenge is, we can find a lot of very senior experienced salespeople, because they’re at that time of life where they are looking for more fulfilment in both family and business. But it’s the new grads, with zero-to-five years’ experience, who may want to go and experience what a big city has to offer. For us to compete, we need to offer access to that big city on an easier level, and we also have to offer some of the attributes of the big city: great restaurants, fun things to do, and mixers so that people can meet partners and start relationships here. The other thing I would say that can really drive people is that we could start to do more things around volunteerism here. In all the hiring we would do at Salesforce, it was incredible how many people were massively inspired by volunteerism. Q – So, community work as part of work culture? KL – Yes. ML – It’s something that we’re currently playing around with. We are the beneficiaries of this incredible community. Obviously we have space right in the downtown core, and the reason we have that is accessibility to other brick-and-beam buildings, other companies, resources, restaurants – all the type of stuff young companies want and need. So, to give back to the community that’s helped us establish and build this is a big priority moving forward. It’s something that’s hard to focus on when 100 per cent of everybody’s time is focused on building the business and finding the first few customers, but eventually you find this momentum stage, where you do want to give back to some degree. And that’s something I think is going to be the next wave that will really bolster the power of this community and attract other people to it. KL – The restaurants of Toronto and the buzz of Toronto can be easily offset by people getting more intrinsic value from the place where they live. Toronto can quickly become a less-fulfilling place that sometimes doesn’t offer you the volunteerism, the relationships, the meaning. There’s a whole element where people can find meaning living in this community, helping themselves grow and helping others grow, and having more fun. Just going around with my kids this weekend, going to places like Erin or Caledon or St. Jacobs – I mean, that is not possible in Toronto. It’s not the house (prices), it’s the fact that in 15 minutes, my kid can go and ride a horse. That’s pretty frickin’ amazing. I can get on my mountain bike and within 15 minutes I’m at an amazing trailhead. I mean, that’s not possible in Toronto. It’s not the house; it’s the life and your time. When you have four kids and you’re leading a sales organization like this, your time becomes so precious that the fact that I can go out and get some fresh air with my kids within a 10-minute drive is huge. The transportation link is vital. We have to have better accessibility, an all-day train to Toronto. When that gets here, that’s going to be amazing, because a one-hour commute has become a semi-acceptable norm in Toronto. If people can hop on the train downtown and be here for their job within an hour, that is such a normal commute. Q – With this new local focus on building up sales talent, what is the opportunity facing our tech community when it comes to sales? ML – It’s more an opportunity for Canada than for this community in general. Look at the most recent IPO coming out of Canada, at Shopify. Not an IPO, but they’ve filed their F-1. That’s not an organization that traditionally built off of sales. They had a low-user-acquisition-cost process, in that people signed up based on discovering Shopify’s products through their own searches (how do I set up an online store; how do I sell widgets online). Interestingly enough, now they are developing their sales process for enterprise customers, just around the corner from us. And so, here we have an awesome company, an amazing tech story, building their sales community in Kitchener-Waterloo. If they can do that successfully here, and when we can do that successfully here, we’re going to basically show the entire world that you can build amazing technology at highly reduced cost to what you would build it at in the Valley. Our customer acquisition costs are less because, frankly, salaries are lower because the cost of living is much more accessibile. And, we can build exponentially growing organizations on that model. Low customer-acquisition cost, because your cost of sale is low, means that you can infinitely scale as long as you keep that in check and keep your customers around. How do you keep your customers around? By building great technology. So, what we’re doing here is essentially setting that baseline for the next generation of organizations. When you think back to a lot of the amazing tech stories of the most recent generation, a lot of them were built off of channels or no sales process whatsoever. The direct sale is the thing that we need to get right as an ecosystem and as a country, because if we don’t, I think our future is pretty doom-and-gloom, because our commodities aren’t going to last, and that’s not always going to be the main export of Canada. And we can’t keep bleeding out the talent, so we’ve got to internalize that process. Kris has been trained over his career by some of the best software sales organizations in the world. Eight years at Salesforce, from $40 million in revenue to $3 billion in revenue. And that’s not something that too many people who stayed in Canada can learn, because they always get sucked out to the States. We’re both Canadian, we’re both committed to this region, we both live locally. I mean, eventually I might have children, and I want this to be a place where they can grow and succeed in not just engineering, but maybe in sales roles. I think sales is a unique opportunity, because it’s not the traditional, boiler-room-style sales process any more, because sales are technical. Sales is a combination of both art and science. Customers don’t want to be sold to; they want to be educated, which means the salespeople need to have a very technical understanding of what they’re selling and what they’re communicating, and how they’re educating customers. That means your salespeople need to be really intelligent, and this is one of the smartest communities in the world. I think we won an award for that a few years ago. So, technically this is one of the best places in Canada to do exactly what we’re doing, because you have this collision of engineering – we have one of the largest undergrad engineering programs; TCV was blown away that there are 7,200 students in that program – and combine that with really smart people and experienced sales leadership, and you can’t lose. I’ve learned so much from Kris in the five weeks that we’ve worked together now, just hearing him coach our reps to be more productive. The message I told Kris when he joined is, I think our sales team is at 40 or 50 per cent productivity. What do we need to do to get to 80, 90, or dare I say 100, and that’s exactly what he’s done. We’re a bunch of scientists, and we sell like scientists and that works, but the slight nuances and things I’ve learned from a lifetime of career development in these roles is exactly what we need here. That’s why Rev is so important, because there’s been this historical approach to startups, from Communitech and from Velocity, that to be successful you need to raise money. The message that I always tell these companies – and I’ve invested in about 15 of them now – is, the chef doesn’t celebrate buying the ingredients. Raising money is not a hallmark of success and it’s not a milestone; it’s what you do with that money that represents the success. For most companies, if they can build the technology and they have issues raising, it’s because they haven’t actually validated that product in market by actually running a sales process, and running the type of volume they need to. That’s why I’m so bullish on what Rev’s doing. It’s why I’m spending so much time with them, spending so much time with the Velocity program, because it’s not about raising money. It’s about building businesses, and I think if we, as a community, can shift our focus towards that, and leverage experts like Kris in this field, we’ll be an unstoppable community. Q – Anything to add? KL – It’s in all our best interests, if we have the commercial skills, to help others develop those commercial skills. It shouldn’t be about my talent versus your talent. It should be about our talent, and helping everyone’s talent progress. I’ll be thrilled if I can build some leaders who go and lead other great Waterloo Region companies, because then they might build some people who come back to my company. I think that’s great, and we do all need to contribute, and we need to find the ideal networks to contribute. One of Silicon Valley’s hallmarks of success is the communication of ideas to one another. And I think in Waterloo Region, that has happened on the engineering side, but I don’t believe it’s at a point where it’s happening on the commercial side. I see that in Silicon Valley, that commercial leaders share ideas with one another, and if we can develop that culture here, it’s going to foster formal and informal networks and learning. Photo: Michael Litt (left) and Kris Lawson at Vidyard’s Kitchener headquarters Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo looks at the issues, people and events that shape Waterloo Region’s technology sector.